tailieunhanh - Financial Literacy: An Overview of Practice, Research, and Policy

Here, bank A has borrowed from bank B, and bank B has borrowed from bank C, etc. Then, if A takes a hit and defaults, then bank B will suffer a loss. If the loss is large enough to wipe out B’s capital, then B defaults. Bank C then takes a hit. In turn, if the loss is big enough, bank C defaults, etc. We could dub this the “domino” model of fi nancial contagion. If the domino model of fi nancial contagion is the relevant one for our world, then defaults on subprime mortgages would have had. | Financial Literacy An Overview of Practice Research and Policy Sandra Braunstein and Carolyn Welch of the Board s Division of Consumer and Community Affairs prepared this article. In recent years financial literacy has gained the attention of a wide range of major banking companies government agencies grass-roots consumer and community interest groups and other organizations. Interested groups including policymakers are concerned that consumers lack a working knowledge of financial concepts and do not have the tools they need to make decisions most advantageous to their economic well-being. Such financial literacy deficiencies can affect an individual s or family s day-to-day money management and ability to save for long-term goals such as buying a home seeking higher education or financing retirement. Ineffective money management can also result in behaviors that make consumers vulnerable to severe financial crises. From a broader perspective market operations and competitive forces are compromised when consumers do not have the skills to manage their finances effectively. Informed participants help create a more competitive more efficient market. As knowledgeable consumers demand products that meet their short- and long-term financial needs providers compete to create products having the characteristics that best respond to those demands. As concern about financial literacy has increased so too have the number and variety of financial literacy training programs and program providers some offering comprehensive information on savings credit and similar topics for a broad audience and others tailored to a specific group such as youth or military personnel or focused on a specific goal such as home ownership or savings. The findings of studies of the effectiveness of financial literacy training have been mixed. Although some programs particularly those having discrete objectives have succeeded in improving certain aspects of consumers personal financial management .