Question

Suggest two reasons why surveys of financial capability or financial literacy often find (across a wide range of countries) little or no association between people’s capacity for saving and their ability to control their finances through budgeting.

Answer 1

Surveys of financial capability may find little relevance to the ability to control the finance

1) Most of the surveys focus on the subject's knowledge of financial awareness or literacy, then assessing the control over their finances. Most of the time the candidate might have superior knowledge, but no control over the finances. For eg. a student has no control over his family's finances. Here, he/she might have ability to control the finances, but no capacity for savings.

2) Financial awareness only equips people to manage their savings by investing in various channels or securities. However, a person's capacity of savings has no guaratee that they are financially aware and are able to control their finances effectively through budgeting.