Poor people in third world countries have dreams and visions just like everybody else all over the world. The major difference between these people in developing countries and the ones in developed countries is that the poor ones lack opportunities and resources. Money management is a challenge facing the people in developing countries. It is difficult to make future planning when making ends meet on a daily basis is a struggle in itself. To reduce “outflow”, poor people end up minimizing expenditure and consumption in many ways. popular strategies of controlling the outflows include
- opening savings accounts for various purposes such as dowry, building houses, health expenses and buying land
- designating the income resources for specific expenditures
- purchasing food stocks and any other basic needs in bulk
- keeping written account of one’s personal expenses
In times of stress, it is normal for poor people to cut back on expenses for clothing and education. The number of meals in a day may even be reduced. Furthermore, the family may move to a cheaper house.
INTRODUCTION OF MICROFINANCE
Even though informal saving continues to be an important part of money management in developing countries, the introduction of microfinance industries is playing a major role. Not only do the microfinance industries offer a wide range of products and services to their clients, they also seek new strategies for becoming even more profitable than they already are. Few of the microfinance industries are currently forming alliances with various financial institutions so as to effectively deliver their services.
Choosing the correct microfinance company to invest in is quite crucial due to the increasing number of services. One needs a lot of skill and information to calculate the costs and the amount required to make repayments. It is the role of the microfinance industries to empower their clients to make strategic choices regarding the use of these financial services which are a benefit to both the client and the company.
OBJECTIVES OF FINANCIAL EDUCATION
The main purpose of financial education is to make people aware of the different concepts of proper money management. It aims at enabling people to be more informed when it comes to making financial decisions on spending and budgeting.
Financial literacy helps people to set realistic financial goals and optimize their options.
Financial education covers a wide scope of topics ranging from managing risks, managing one’s cash flow and building assets.
BENEFITS OF FINANCIAL EDUCATION
In this context of developing countries, financial education is majorly helpful to the poor people who are vulnerable to financial pressures. Additionally it opens up potential employment opportunities for online based financial jobs, such as Xero Waterloo, an online bookkeeping firm. Financial education, therefore, increases the client’s skill of decision making and further prepares them to cope with their daily lives.
Financial education also helps the clients to choose keenly among the various micro-finance industries being set up. Through this knowledge of the different services available, chances of experiencing business risks are low.
Furthermore, financial education encourages the young people in these developing countries to develop the habit of saving. Through this, they can set up their own businesses and not just rely on the white collar jobs.