We have all, at some point in our life, taken a personality, psychology, or IQ test. More often than not, the cynical part of us find these tests to be utterly useless and fake. That’s why if we’re presented with a financial literacy test that is guaranteed to work but only comprises of 3 questions, we’re bound to be skeptical. The more suspicious ones would probably even disregard the notion without a second thought. However, these questions, known as the “Big Three”, are actually accepted around the world as a way of gauging the financial knowledge of people.

According to Director Annamaria Lusardi, the person who created the “Big Three” together with Professor Olivia S. Mitchell, the results of their survey showed a horrifying picture of a financially illiterate nation. In her study, The Economic Importance of Financial Literacy: Theory and Evidence, Director Lusardi said that despite knowing the need to improve the nation’s financial education, there’s still so much more to learn about effectively disseminating financial knowledge to the population at large. I very much share this concern since financial literacy plays a humongous role in the future and the financial stability of the population. If you live in a nation with a complex financial system and you can’t even answer the “Big Three”, then you’re in for a rocky ride.

But how exactly does one get financially literate? I, myself would like to think that I’m quite adept at handling my finances from the basic budgeting to investments and long-term planning, to debts and credits. And despite undergoing years of education, I’d like to admit that most of my knowledge of handling my finances came from experience and just a bit from school. I’m pretty sure that it’s not just me. Many among the population would attest to the fact that they learned to be financially literate through experience. Here’s where discord happens. If experience drives improvements in financial literacy, do we even need to sign up for a Credit Counseling or financial education program where we have to pay hundreds of dollars just to be optimally financially literate? The simple answer would be yes, we should. If we try to learn via experience for example, by investing in stocks, when we don’t even have the fundamentals of financing down to pat, we’d just be wasting our time.

On one hand, if we try the financial education route, there’s the question of effectiveness. Despite the efforts of researchers in gaining a better understanding of financial knowledge, there are still many gaps that need to be filled, especially in understanding the dimensions of financial literacy investment, more specifically, on how financial education affects an individual’s financial decisions. Though there’s still a lot to learn about financial literacy, there’s no denying the fact that higher financial literacy is associated with positive results such as higher financial outcomes and economic-wellbeing. Lawmakers should then put more effort in encouraging the development of a targeted education program and providing easily accessible Credit Counseling or financial education opportunities

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