Home Finance Financial education and economic development

Financial education and economic development

by trpliquidation
0 comment
Financial Education and Economic Development

Financial education is an essential element for the economic and social development of countries. In an increasingly interconnected world, understanding how personal finance and markets work is an indispensable skill for both individuals and economies. However, in countries like Colombia, the lack of financial education is negatively impacting financial inclusion, investment and economic growth. From a liberal perspective, this issue can be analyzed using the principles of authors such as Leonard Read, Friedrich Hayek and Milton Friedman, who emphasize the importance of individual choice and free markets as engines of progress.

Financial education: a tool for economic freedom

Leonard Read, in his iconic work Me, pencilillustrates how markets enable collaboration among millions of people, even without direct interaction, to produce complex goods and services.

Likewise, financial education allows individuals to understand this system, allowing them to participate more effectively in the economy. Without a basic understanding of concepts such as compound interest, saving and investing, people cannot make informed decisions to maximize their well-being. The lack of financial education not only limits individual potential, but also limits the ability of markets to generate wealth and growth.

Friedrich Hayek contributes to this discussion with his concept of “spread knowledge.” According to Hayek, knowledge does not reside in a central authority, but is spread throughout society. Financial education should therefore not be seen as a set of rules from above, but as a means for individuals to acquire the tools necessary to interpret and use the knowledge available in the markets. A financially literate citizen can act autonomously and make decisions that not only increase their personal well-being, but also contribute to market dynamics.

The impact of the lack of financial education in Colombia

According to the World BankAbout 2.5 billion people worldwide do not use formal financial services, and 75% of the poor do not have a bank account. Inclusion is key to reducing poverty and promoting prosperity. In Colombia, access to the financial system remains limited. According to data from Banca de las OportunidadesIn 2023, 15% of the adult population still did not have access to basic financial services such as savings accounts. Furthermore, many people who have access to credit do not know how to manage their debt, leading to over-indebtedness problems. This not only affects families, but also creates inefficiencies in the financial system and limits economic growth.

Milton Friedman, op Capitalism and freedomnotes that a market-based economic system depends on individuals making rational decisions. Without financial education, this rationality is jeopardized, impacting both consumption and investment. In this context, financial education should be seen as a strategic investment to empower citizens and strengthen the national economy.

Financial education and investments: a virtuous circle

Financial education not only promotes savings, but also promotes investment, a fundamental pillar of economic development. Hayek argued that saving and investment are essential for capital accumulation and innovation. In the case of Colombia, improving financial education would allow more people to participate in the stock market, invest in businesses and generate employment.

Furthermore, in a global context where technological innovation and the digital economy are redefining markets, financial education enables citizens to take advantage of opportunities in areas such as crypto assets, crowdfunding and e-commerce. These instruments can serve as a catalyst for Colombia to diversify its economy and reduce dependence on traditional sectors such as extractive industries.

Financial education is more than a practical tool; it is a path to ensuring economic freedom and social progress. As Leonard Read emphasizes, every economic choice we make is connected to the decisions of millions of others. For these choices to yield the best results, citizens must have the necessary knowledge.

Colombia and the world face the challenge and opportunity to strengthen the financial education of their population. This effort will not only stimulate economic development, but also help build freer societies in which individuals can fully enjoy the fruits of their labor and creativity. Ultimately, financial education is not just a matter of individual well-being, but an engine for sustainable growth and shared prosperity.


Omar Camilo Hernández Mercado is a law student at the Universidad Libre de Colombia, senior coordinator of Students for Freedom in Colombia, and a seminarian in “The Austrian School of Economics” at the International Bases Foundation.

You may also like

logo

Stay informed with our comprehensive general news site, covering breaking news, politics, entertainment, technology, and more. Get timely updates, in-depth analysis, and insightful articles to keep you engaged and knowledgeable about the world’s latest events.

Subscribe

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

© 2024 – All Right Reserved.