The unprecedented stresses and strains imposed by the Covid-19 pandemic have highlighted the importance of financial literacy in our everyday lives.
An intensified global focus on this issue means that many countries around the world are now rolling out such strategies for their populations.
According to the 2020 International Survey of Adult Financial Literacy produced by the Organisation for Economic Co-operation and Development (OECD), only 61 per cent of respondents from twenty-six countries – including twelve OECD members – across Asia, Europe and Latin America had the minimum necessary understanding of concepts and prudent principles needed to manage their finances.
The OECD’s report also found that while a little over half of the adults surveyed used a savings, investment or retirement product, as many as 28 per cent of them only had access to sufficient savings to support themselves for just one week if they lost their jobs.
In addition, Standard & Poor’s Global Finlit Survey has also warned of low global levels of financial literacy and the disproportionate effect that this has on women and young people. Furthermore, a lack of knowledge about finance and financial products prevents people from accessing banking and financial services, with resulting negative effects on national economies.
Overall, the existence of significant groups with limited financial knowledge and resilience has caused hardship across many countries over recent years.
What is also clear is that the negative impacts of a lack of financial literacy should not only be measured in terms of economic statistics – the evidence suggests that financial insecurity is also strongly linked to high levels of stress and poor health. In this context, the OECD survey noted that 42 per cent of individuals from its countries’ sample groups worried about meeting their everyday living expenses.
As a consequence, the challenge of boosting financial literacy is one that is receiving more and more attention from many countries, including the UAE.
In its Abu Dhabi Family Wellbeing Strategy published in January this year, the Department of Community Development – Abu Dhabi outlined the results of its Quality-of-Life Survey that identified the major issues of concern for the Emirate’s citizens and residents today.
It is clear from the results that financial difficulties and worries loom large among the social challenges that Abu Dhabi faces across all sectors of its population.
These responses indicated concerns about financial planning and failing to save, difficulties in managing and repaying debt and excessive spending on luxury items encouraged by social and peer pressure.
Nevertheless, the survey found that 87 per cent of Abu Dhabi youth agreed that it was important to budget and save. They were also aware of financial problems related to poor planning, social pressure to elevate individual living standards and access to support from families.
Concerning the problems faced by seniors, the survey found that 84 per cent of such people had not started to financially plan for their retirement.
The problems faced by senior citizens indicate a lack of awareness and training to enable better retirement readiness, early retirement ages compared to comparable countries and a perception that existing pensions were inadequate.
The Quality-of-Life Survey’s results demonstrate the scale of financial management challenges for Abu Dhabi’s people.
These findings have informed the Abu Dhabi Family Wellbeing Strategy’s ambitious quest to address these challenges through a range of Strategic Priorities designed to meet six key Strategic Objectives: Improve mental wellbeing; Build financial resilience; Support family growth; Strengthen family bonds and stability; Enable an engaged and resilient community; and Improve care for Senior Citizens.
As the second strategic objective, measures to Build financial resilience will incorporate the two Strategic Priorities of instilling financially responsible behaviours and improving preparedness for retirement.
These priorities will involve building greater personal responsibility in money management through initiatives such as the Ghaya Programme, which gives participants the opportunity to take a bespoke course in financial literacy and the Ma’an Social Incubator, which encourages innovative startups to bring new financial management solutions to the market.
Reflecting the findings of international reports, it is clear that the promotion of better financial literacy is essential to both reduce anxiety for individuals in Abu Dhabi and also contribute at a national level to healthier economic performance and sounder government finances.
Our response to this challenge should be to educate people in basic financial literacy concepts through innovative communications techniques, digital tools and inclusive social programmes that meet the specific needs of our populations.
These programmes should be based on a holistic, community-driven approach through government entities, non-profit organisations, foundations and social enterprises to encourage and build financial literacy and resilience as an essential social benefit for Abu Dhabi’s people.
Better financial management and planning will help enhance the overall wellbeing of families and strengthen their cohesion and prosperity within the Abu Dhabi community.
Addressing money concerns will be a key factor in empowering youth to improve their lives for the better and ensure they fulfil their potential to lead productive and rewarding lives.
And easing the transition from working life to retirement will enable Senior Citizens to continue to play positive and engaged roles in their families and communities.
In these ways, we can enhance the health and prosperity of our people and boost our overall national wellbeing over the long term.
Our task now is to drive the engagement needed for our communities to work together to secure a financially healthy future.
Salama Al Ameemi is Director General of the Authority of Social Contribution – Ma’an
