Value systems are an essential part of society, understanding them, helps us better integrate with one another as well as maximize our quality of life. Money is a central piece in the modern day value system, it is fundamental to the daily functionality of society. Now, it is more essential than ever to understand how money works in order to maintain harmony between the individual and the collective.

Here, the idea of financial literacy comes to the forefront. It is the collection of knowledge and skills that make an individual capable of interacting with and understanding the financial environment around them. Arguably, the only road to financial capability and well-being is through achieving this understanding of the financial value system (Świecka, 2019).

Smaller Pictures Bigger Concepts

Assistant Professor of Accounting at Onsi Sawiris School of Business, The American University in Cairo,  Moataz El-Helaly highlights the importance of acquiring financial literacy regardless of the individual’s educational background. As part of his Financial Literacy course offered as part of the CORE curriculum at AUC in collaboration with the School of Business and the Liberal Arts Academy, El-Helaly underlines the importance of how an individual’s understanding of the economy, even if it is a basic one, allows them to better engage with society as a whole.

“[Concepts like] supply and demand, scarcity of resources, these are why companies actually compete with one another over consumer spending,” says El-Helaly. In other words, understanding the bigger picture economic concepts allows individuals to better understand their own behavior as a part of the economic environment they are in. He further highlights that individuals, companies and countries are all controlled by the core concept of scarcity of resources regardless of their size difference. In this case, financial literacy allows an individual to relate their own scarcity of resources to that of bigger entities around them, be it large or small business they interact with or the influence they experience from their governments implementing fiscal and monetary policies to manage financial resources.

El-Helaly extends his explanation to another economic concept, the Opportunity Cost; for every choice an individual makes, there is an opportunity lost in return for the one that it acquired. He highlights that it is important for individuals to understand how their everyday choices culminate in making a bigger picture. Financial literacy fosters foresight and the ability to make calculated decisions. As El-Helaly emphasizes, “I tell my students, [the amount you pay for] one cup of coffee everyday, saved over two or three years, after a long time, it could become a fortune.” Such an idea underlines the importance of saving, planned spending, and the domino effect our day to day decisions have.

Financial Education and Inclusion

Not only does financial literacy foster change within the lives of individuals, it also has bigger implications on the functions of society. El-Helaly highlights that one of the concepts he discusses with students as part of financial literacy is the idea of a cashless economy, emphasizing the importance of understanding the different ways in which cash flows within the economy.

The concept of a cashless economy has also implications on including the informal sector into the formal channels of cash flow within the economy, allowing better monitoring of the financial assets in a country. This has been discussed in numerous scholarly research focusing on both the impact of shifting to cashless transaction methods on both people in the formal and informal sectors. As one study highlights with regards to the shift towards cashless means,

If a typical seller has serious doubts about the exchange value of any token that he receives in return for the good he sells, a medium of exchange is impossible to sustain. In a monetary equilibrium in which money is valued, a trader has to believe that the money will be accepted by other traders and this belief should be consistent with the behavior of others. (Cohen et al. , 2020)

In other words, for an economy to become cashless, individuals have to collectively repurpose their understanding of money – instead of putting its value in a paper, they would put its value in a card or an electronic point of sale (POS). Financial literacy allows individuals to develop an understanding of the financial value system which is essential to respond and interact with changes that a society is likely to encounter. Arguably, a change in the financial system such as the cashless shift cannot be accepted or integrated without an active socialization through the financial education of individuals.

Financial Literacy in a Turbulent Economy

While financial literacy helps society navigate the changes in its financial system, it also allows individuals to shield themselves against economic turbulence. The key to financial education is understanding that the financial system of a country is a value system at its core.

When asked about the best way to save amidst the constant changes the economy is facing, El-Helaly points out that “cash doesn’t have an intrinsic value, it is a measure of value, in itself it’s just a piece of paper, this is not [the case] with gold.” Being financially literate offers an individual an introspective lens into the value of objects within the economy, allowing them to make better choices. For instance, recognizing that cash in itself does not have an inherent value, could be an eye opener on other sources of capital that have a much more concrete value definition within the financial system.

Furthermore, financial literacy helps in identifying necessary goals; for instance, El-Helaly says, “it’s never about how much you earn, but always about how you spend your money,” emphasizing the importance of prioritizing planned spending and saving as well as highlighting that, “at some point, you need to make money work for you and stop working for money.” Without financial literacy, the capacity of understanding one’s ability to manage their resources would be significantly diminished, limiting the opportunities that could be reached through a proper financial education.