FINANCIAL LITERACY: From dreams to reality

Financial diary studies have documented the surprising complexity of the financial management practices of low-income households as they use various methods of saving and borrowing to smooth income. What has received less attention, however, is the complexity they face in deciding how to best use the limited financial resources they are able to accumulate. Lacking awareness of the range of options and unable to compare returns and risks for the few options they are aware of, many low-income households either play it safe, investing their savings into familiar but low-margin activities, or gamble, often with disastrous results.

Financial inclusion programs often address barriers related to access to financial services. But they rarely address the trickier question of how clients can use savings, credit, and insurance to actually increase and diversify income. This is the goal of ACCESS’s “Dreams to Reality” (D2R) financial education program, which demonstrates how financial education concepts work together. Just as a house cannot be built with a hammer alone, financial goals cannot be met with just one financial service tool. The tools must be used in combination in order to reach those goals.