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Why Asia needs more financial education

In the aftermath of the global financial crisis of 2007-2008, financial literacy and financial education are gaining more attention around the world. There were sobering lessons, for example, in how the mis-selling of financial products contributed directly to the severity of the crisis, both in developed economies and in Asia. Financial education can be viewed as a way to build awareness of such matter and systems throughout an individual's lifetime, results of which would include improved financial literacy and well-being. It is hard to quantify the benefits and costs of investing in financial education. With some exceptions, Asian economies only devote limited resources to financial education but there are substantial benefits involved with investing more in this field.

     First, a more financially literate population can take advantage of greater financial access of both households and small and medium-size enterprises. Second, a more financially literate population is likely to increase domestic savings rates, thereby reducing reliance on foreign capital. Third, higher and better-allocated savings can result in faster economic growth. Fourth, better financial education of households and entrepreneurs can reduce financial stability risks such as the probability of household or small business loan defaults. Fifth, better financial literacy will improve retirement planning and preparation for old age.

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