From Financial Literacy to Financial Culture


You can't eat or wear money, but it represents all the food and clothes in the world. Hernan Diaz

From time to time, it is useful when one gets one's concepts in order - what one means by the words one uses. If only because concepts are the nodes of the web by which we grasp the world in order to understand it and do something meaningful in it. The time of conceptual housecleaning usually comes when certain terms become confused, and so the difference in meaning between them is lost. And so we will take a closer look at the differences between the concepts of culture and literacy, using the specific case of financial culture and financial literacy.

Culture is commonly understood at two basic levels: individual and societal. In confrontation with the concept of literacy, we must therefore be particularly interested in culture as a specifically human mode of individual development. The culture of a person can be understood as the actual level of their development, i.e. the degree of thinking, knowledge and communication achieved. In summary, it is about how an individual thinks in different situations and contexts, what they know and what they able to know, how they communicates what they know or how they gain knowledge from communication. It is a relatively precisely identifiable cognitive level of an individual, and there is an idea of both stages and maximum levels of its development. With this knowledge, it is possible to look in more detail at what financial culture is, how it relates to thinking, cognition and communication, and how it differs from the more common notion of financial literacy.

By financial culture, we are referring primarily to the cognitive apparatus - thinking + cognition + communication - through which individuals navigate and make decisions about material and non-material values. Individual financial culture emerges as the sum of life experiences with problems, decisions and solutions involving assets or money. The mind that is allowed to develop by expanding these experiences can be used later. The honing of thinking and cognition can stand on tasks in which the handling of property or money is thematised. It is also true that a person with such a developed mindset and cognition does not have to seek future employment exclusively in the financial profession, in banking, insurance or financial consultancy (although the quality of future employees of financial institutions may also be derived from the level of financial culture they possess). These individual qualities developed in a financial context - more complex thinking, more nuanced cognition and more variable expression - are useful in at least two ways - they represent an improved cognitive apparatus that increases the chances of being able to deal with more complex and challenging tasks in other areas or at other times of life. An equally important result of such programmatic development is the building up of a person's protective mechanisms, his or her rational brakes, defensive capacities, and preventive habits. These should ensure that the individual thinks consistently, i.e. completely and to the consequences - for example, they should be able to forecast easily and thus avoid making plans that lead to unfavourable developments in their life situation. In this sense, for example, the ability to react appropriately to an attempted fraud or corruption is conditional on one's formed awareness of the consequences of situations in which fraudulent intentions or corrupt proposals are made.

The development of a person's financial culture can thus be seen as a process of rational refinement of a person's values. It can be seen as a growth in the ability to navigate the world of values that are embodied in property, financially. The world of finance contains both simple phenomena and complex relationships, and can thus serve as a learning resource for a variety of cognitive, thinking and communicative activities for young schoolchildren and adult learners alike. To illustrate, consider a model learning situation in which a large sum of money or a long-term investment decision has to be made. The development of a financial culture should take the form of purposefully placing children and young people in situations in which they have to reckon (figuratively and literally) with financial circumstances or assets. At the same time, the common denominator of such and similar learning situations needs to be a call for more concrete recognition of value and for mastery of the ideas needed both to make generally acceptable decisions and to discover sustainable solutions - learning to make decisions about a large sum aims, on the one hand, at recognising large and small amounts of value, and learning to make decisions about a long-term investment aims at understanding how value changes over time. At the end of such a targeted learning experience, there could be a person who has learned to lead a self-sufficient and financially stable life.

When people talk about a literate person, they usually refer to the fact that someone can read, write and count, and therefore can somehow deal with signs - letters (both the Greek word grammata and the English word literacy suggest this). If we consider someone to be literate, we assume that they have only a rudimentary mastery of operations with written characters - a reading and writing mastery of simple texts and a numerical mastery of simple problems that one has already encountered. A literate person is a beginner and only a beginner in reading, writing and arithmetic. Thus, the measure of literacy cannot be sought or determined because literacy is only one, albeit initial, level of learning - the ability to deal with written characters is a key prerequisite for learning. We know that a literate person can learn, but we do not know what he or she has learned and to what extent.

A literate person can handle basic sign operations - the reception and production of simple texts, including simple arithmetic expressions (more complex calculations are possible precisely because of the ability to record them in writing). At the same time, a varied experience of signs as carriers of value may not appear in a literate person, and therefore not be expected - we do not know to what extent this person is able to understand texts - he may somehow understand the lesson of the fairy tale of the Threepenny Opera, but he can no longer be expected to quickly find incorrect data in a pay slip; a literate person cannot and does not need to ask more complex questions about the moral of the fairy tale he has read, or to ask more precisely about the incorrect result in the pay slip. The literate person remains a defenseless individual - in adulthood he quietly falls for a scam because he has read something, quietly accepts a bribe because he has calculated something.

Literacy is thus a conceptual trap. It was necessary to get out of it, and so the adjective "functional" emerged. At first, it might have seemed that the matter was settled - after all, whether someone is literate depends on context, i.e. on how one can handle written characters and which operations one uses to read, write and count. However, this context is in no way categorised, cognitively or level-specific. For example, it is not obvious whether the context is supposed to be a fairy tale story or an administrative payroll document. The adjective 'functional' emphasises that the level of literacy depends primarily on the written record to be received or produced. In doing so, it is clear that different communication and thought processes are mobilised in reading a story than in writing it. Thus a strange paradox arises: a literate person can read a good fairy tale but cannot write it - he is therefore literate in reading a fairy tale and illiterate in writing one. Strange indeed - as if a person's improvement in literacy should derive from the degree of difficulty of the written record and the basic level of ability to be realized in contact with it. It's simply illogical. It seems more logical that the degree of development of literacy - that is, the degree of development of reading, writing and arithmetic - should be inferred from the demonstrable level of development of these processes - that is, the degree of development of a person's individual learning aptitudes (dispositions). But any development of literacy, any progress beyond the basic or first level - this is no longer just literacy. It is already culture as well. It is no longer just a basic process, it is - at some level - a developed, cultivated and cultured mind.

Let us add that the addition of financially (literate) will not improve matters - it is not clear in what situations, for example, a financially literate individual should act as an independent person, and in what circumstances it is appropriate for them to seek expert advice - because there may, for example, be a great deal of value involved, which may be of long-term benefit, but with some risk. Similarly, other functional literacies can be problematised: information literacy - What information does an information literate person not need to understand; media literacy - At what level should a media literate person understand media content that has a manipulative purpose; digital literacy - Is there a digitally literate person who cannot use his or her skills to carry out a fraud, for example, to steal or to his or her own detriment? Financial literacy, but also information literacy, digital literacy or media literacy are all manifestations of functional literacy in different contexts. In order to talk about a person's financial, information, digital or media literacy, it is necessary to conceptualise both the internal and external context of this development - both the activities and the concepts that the mind is supposed to develop at a certain stage of its growth. Without thinking, cognition and communication activities with concepts, the mind simply cannot learn (remember, create complex knowledge) and therefore cannot improve (think differentiatedly and communicate functionally).

The cliché is that we become most accurately aware of values when we lose them, usually along with their bearers - we lose people and potential experiences with them, relationships end and cease to provide the benefits they used to, we don't guard things and lose the value we've grown accustomed to, someone deprives us of money, and we find ourselves in a state of insecurity. These are not pleasant moments. It might be worth our while to try and challenge this cliché as a society. For example, by expertly helping children and young people to develop more complex ideas and more nuanced knowledge, expressed in more sophisticated, precise, variable ways. The world of finance is an interesting and important life context that needs to be understood - for example, by reading, writing and arithmetic - in virtually all human situations and life tasks. It is both possible and necessary to help people become more cultured, to cultivate their gifts in a planned and purposeful way, to hone their living intelligence, to improve their decision-making and actions - by teaching them values that they can grasp conceptually and then do something meaningful with them. In the 21st century, in a time of permanent crises, young people can get away with this.

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Karel Dvořák PhD. – DaCoSiDe expert tasked with the creation of A2/B1-level methodological guidelines and certification tools


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