Enhancing the financial literacy of young people: A conceptual approach based on the variation theory of learning

Abstract

Aside from being pertinent to the financial stability and economic development, financial literacy is regarded as an essential life skill for young people, which enables them to participate in modern society. National surveys, however, have consistently revealed that the levels of financial literacy of young people are among the lowest as compared to the other demographics. Increasingly more countries are recognizing the importance of financial literacy and are developing financial education programs for schoolchildren. The main goal of many of these programs is to equip young people with the knowledge necessary to manage their financial resources effectively in a practical but piecemeal manner, such as knowledge of how to maintain a bank account and how to budget. The emphasis of these programs is on practical knowledge. In contrast to this prevailing approach, we advocate a conceptual approach based on the variation theory of learning to enhance the financial literacy of young people. It is argued that helping learners develop an in-depth understanding of a cluster of core financial concepts through the use of desirable patterns of variation and invariance will make it possible for the learners to develop an analytical framework, or a "lens", based on the disciplines of economics and finance. In this way, learners will be able to evaluate financial situations in a more sophisticated way, as this lens will empower them to attend to the critical aspects of a financial situation that they have not discerned before. As a result, they will be able to see their financial situation in a new light and have a greater chance of making well-reasoned financial decisions.