We’re marking Financial Literacy Month at Lolli by reflecting on how bitcoin can bring financial literacy to the world.
Financial literacy is the ability to understand and effectively use financial skills like personal financial management and budgeting.
By understanding the way money works, people can make money work for them and thereby accumulate wealth, save for future generations, avoid predatory lending practices, and more. Thus, being financially literature is a critical way to position yourself and your family up for financial success.
Unfortunately, financial literacy is far from widespread. According to a report from the national Financial Educators Council in 2023, the share of Americans who said not being financially literate cost them more than $10,000 is up to 38% from 11% in 2021. Adults in the U.S. are notably lacking in financial literacy, answering, on average, 50% of 28 basic money questions given on a survey in 2022. The share of respondents (23%) who were unable to answer more than seven questions correctly was higher than any other year of the survey.
Worldwide, only 1-in-3 adults are financial literate. This means that roughly 2.5 billion adults, most of whom are in developing countries, do not understand basic financial concepts.
For many, particularly those in developing countries, bitcoin presents a solution to endemic issues with low financial literacy and wellbeing by giving everyone free and equal access to money and the ability to securely store and exchange money. Information about bitcoin as money is widely democratized on the internet, giving everyone the ability to research and learn about how bitcoin can benefit them.
Some key factors that continue to hold us back global financial literacy are lack of trust in financial services, lack of reliable financial resources, and socioeconomic and political factors. Read on to learn more about how bitcoin helps to bridge these systemic gaps and promote financial literacy for all.
Lack of Trust in Financial Resources and Services
One of the biggest obstacles to financial literacy is a pervasive lack of trust in traditional financial resources and services like banks, financial institutions, and other financial services.
This mistrust can stem from any number of factors, like past experiences with being excluded or rejected from financial benefits or concerns about privacy and security. For this reason, some people may feel that financial resources are inaccessible or avoid them, which can be a significant barrier to achieving financial literacy.
Bitcoin is the first and only completely transparent monetary system. It gives everyone with internet connection equal access to viewing all transactions on the network. Moreover, bitcoin’s global distributed ledger of transactions and its highly secure method of verifying transactions means it would be nearly impossible to hack. If ever this were to happen, the corrupted record would be immediately obvious to all on the network.
Bitcoin also fundamentally eliminates the need to trust in any one central authority or group to mediate the monetary system, thereby removing elements of banking that are prone to corruption, discrimination, and exclusionary practices. Instead, bitcoin is designed as a trustless system, operating with the reliable mechanics of clockwork. In this way, bitcoin becomes (ironically) exceedingly trustworthy, as it eliminates the possibility of systemic manipulation, inflation, or fraud and gives people greater control over their own finances.
Lack of Reliable Financial Resources
Research has shown that financial literacy education can help people make better financial decisions. After all, financial literacy is not innate but learned, and if people lack access to adequate information, they will be unable to build the skills and knowledge base they need to manage their finances with success.
Bitcoin democratizes access to financial education as information about bitcoin, how to use it, and what makes it sound money is free and accessible to all. Anyone can learn about bitcoin through the internet, online communities, and resources like the Bitcoin White Paper. Bitcoin, both learning about and owning it, is thereby a fully democratized experience that puts the power of financial freedom in the hands of anyone with an internet connection.
Socioeconomic and Political Factors
According to national surveys in the U.S., there is a notable disparity in financial literacy rates among racial groups and ethnicities. Black, Hispanic, and Native American populations tend to have lower rates of financial literacy while White and Asian populations tend to have higher rates.
The same disparity exists for economic wellbeing. The survey showed that ethnic groups that are also associated with lower financial literacy are also more prone to use bill payment services, money orders, and check cashing, which are typically associated with financial insecurity.
Recent studies have shown that systemic socioeconomic and political barriers are to blame for denying certain ethnic groups access to financial skills.
By eliminating the need for banking services and allowing anyone to buy and use sound money, bitcoin can help level the playing field. While banks, lenders, and traditional financial institutions have been shown to historically practice discriminatory or predatory lending practices towards certain racial groups, bitcoin eliminates discriminatory patterns by making money freely and equally accessible to all. Bitcoin also anonymizes transactions, eliminating the personally identifiable information like race, gender, ethnicity, and other identifying characteristics of a person conducting a transaction.
Bitcoin can help bring financial literacy to the world by democratizing access to money and financial education for those who may not have had access to traditional financial services.
Now, help bring bitcoin to the world by sharing Lolli with a friend! 💜