Financial literacy and rights protection of financial services consumers
Financial literacy and rights protection of financial services consumers

Financial literacy is one of the main prerequisites for ensuring more effective protection of financial services consumers. Most important is the better regulation, generally aimed at ensuring good and fair treatment of consumers,  improvement of quality, accessibility and usefulness of financial information and establishing effective mechanisms for resolving consumers disputes. But even the best regulatory framework may not be sufficiently effective if consumers are not aware of their rights and responsibilities, do not know or do not possess enough knowledge to be able to choose the most appropriate financial products for them. And ultimately their financial well-being and future financial security depend on their own choices.


Financial literacy in Bulgaria
Financial literacy in Bulgaria

In general, research in many countries, including those countries with highly developed financial markets like the U.S., shows that the average consumer’s financial knowledge and skills are relatively low. The situation in our country is not very different. Data from a 2010 World Bank  study of financial literacy presents the following picture for Bulgaria:

- Low level of financial literacy - 47% of respondents identify their financial knowledge as poor or none. Particularly disturbing are the data for the group of 16-17- year olds, in which over 53% have identified their financial literacy as weak, namely young people are the corner stone of future active use of financial services and face a  long term consumers` prospective.

- Relatively weak skills in planning and managing personal budget - 73% of the people claim to be making a financial plan for their monthly income and expenses. In practice, however, 39% of them say they rather have an overview of their revenues and expenditures and a further 22% just keep their financial documents without monitoring the movement of their funds.

- Inability to cope with the loss of income -  It is also a concern how long a period within which the majority of the households could cope with a sharp drop of income. Only 11 percent believe they will be able to withstand more than six months - mostly high-income level citizens of most big cities.

- Poor awareness of consumers` rights and services - Low awareness goes hand in hand with the mistrust of institutions to handle a problem adequately. 39% of people are not convinced that the problem would be resolved quickly, and 40% do not believe the problem be resolved fairly.

- Poor knowledge and sharing of financial information - Bulgarians are less active in seeking information on financial matters and 35% never discuss financial issues with friends and family. For the majority of Bulgarians financial information is too specialized and difficult to understand.

 


Financial literacy - a key competence of the 21st century
Financial literacy - a key competence of the 21st century

We live in a much different and complex world than our parents and grandparents lived in. Each life situation  we encounter - a new job, birth of a child, buying a car or a home - requires us to make financial decisions. Simultaneously,financial products and services, from among which we choose, are more and more numerous, complex and risky. Unlike the past, the responsibility for our good health and secure old age becomes our concern, not only of the state.

This reality requires us to have new knowledge related to finances and  their rational management as well as new skills so we can implement our financial knowledge in practice.

Financial literacy has become one of the key competences of the people of the 21st century because the quality and satisfaction of our lives largely depend on it.

Financial Literacy and Well-being

Several studies have suggested direct positive relationship between financial literacy and the well-being of the individual. People with financial expertise are usually in a better financial situation because they more skillfully manage their personal finances, choose financial products whose nature they understand and which match their needs, seek information and take account of the possible risks.

Viewed more broadly, financial literacy is a factor that stimulates the demand for financial products because of the perceived benefits, thus positively impacts on market growth and  economic prosperity. Financially literate consumers, through an informed and rational choice and through conscious exercising of their rights, create conditions for increasing market competition, innovation and improving the quality of the services.


What is financial literacy?
What is financial literacy?

Each of us has dreams and life goals. They may be different- a successful business, secure life, serene old age, better education for our children, nice home, exotic trips. We have in common, though, that in order to achieve them, we should be able to"finance" them. This means that it`s necessary to have sufficient financial knowledge and skills, in other words, to be financially literate enough, to be able to make the best financial decisions for us and effectively manage our personal finances.

Financial literacy is defined as the sum of financial knowledge and skills that helps us understand the financial risks and opportunities, to make rational and informed decisions, to know where we can get help and to be able to take other effective actions to increase our well-being.