In this article we will talk about Financial Literacy Vs Financial Ability, but first – Here is a small, sentimental segue into the twitter debate from a few years ago on savings.

Basically, the question was “Savings: discretionary or obligatory part of life?” In all honesty, a lot goes on in the lives of ordinary citizens for us to have a say on this matter, because we are coming from different financial backgrounds, but of course, I jumped at the chance to publicize my opinion on the matter when I heard this month’s issue is on finance, because…”would I even be a writer if I didn’t?” In any case, here are my two-cents on the debate.

But before we dive into it, you can also read about the various saving techniques that can work for you on here.

Quick Recap

On one side of the debate, people were arguing that individuals without savings are simply financially illiterate. That not having savings was a reckless way of living that paid zero respect to the unpredictable nature of life.

Talking about “as an adult, how can you not have savings?” in that over-hyped twitter aesthetic of making people question themselves.

On the other hand though, there were people more cognizant of the fact that some people are simply not in a position to save money. It’s been argued that some people earn so little and have so many dependants that it’s not even a possibility to save, unless there is an extra income from somewhere else, which, most of the time, is not there.

What is Financial Literacy?

For most people, financial literacy simply means the art of knowing how to spend money wisely and how to save what remains. Nonetheless By Investopia’s standards though, financial literacy is symbolic of the ability to understand and effectively use various financial skills to our advantage.

Now, the issue with the earlier kind of outlook, is that those people who are “financially literate” by that standard are deemed smart and cautious, whereas those who don’t meet the standards on a practical level are deemed reckless and irresponsible.

To a certain extent, financial literacy only applies to a small group of people when we look at it this way, because, if were being honest, what percentage of the population (in a Namibian context) are able to meet the standards as set out in the definition by Investopia?

What is Financial Ability

As is emphasized above, the idea of financial literacy is highly influenced by the financial ability of a person.

What is financial ability?

For this writer, financial ability is a plain allusion to being in a position to have financial power, make unorthodox decisions to that regard and benefit from those decisions in a way that would not have been possible, had such decision not been made.

According to Financial Educators Council, financial ability is an individual’s capacity to stick to a well structured set of financial decision-making, so they are able to pay off debts and stay on top of their financial game.

In a way, financial ability and literacy are similar in essence, but they are not the same.

They are different in that while their goal is eventually, financial emancipation, but their approach and considerations differ, with one being more concerned about the ability to make decisions and stick to them regardless (disciplinary approach) and the other being more focused on the financial position of the hypothetical person in question (whether or not, they are in a position to even make attempts at financial betterment).

But Ina, this month’s issue is on finance, what’s this got to do with anything? The discussion of this article is an awareness campaign on a social, financial issue to enlighten the masses and help you, the reader, draw better-informed decisions.

Practically Speaking

Think of it in this light, a financially able person is more concerned with getting money, spending it on basic needs and saving the remainder for whatever else they may not be able to afford in that current time. They are “able to can”, but that’s where it ends.

A financially literate person is not necessarily concerned with saving money. They are more considerate of how they can make more from what they already have, and they spend from the “more” they get later, not from what they have in the beginning.

Conclusion

Long story short, the value of your financial life and decisions is not necessarily per the dollar value, but sometimes, it is determined by whether or not you are in a position to better your financial situation to begin with.