IDEAS home Printed from
   My bibliography  Save this article

Financial literacy and its role in promoting a sound financial system


  • Doug Widdowson
  • Kim Hailwood

    (Reserve Bank of New Zealand)


This article discusses the importance of financial literacy. Financial literacy – the ability to make informed judgements and decisions regarding the use and management of money – is important for individual consumers of financial services, the financial system and the wider economy. It influences how people save, borrow, invest and manage their financial affairs. It therefore affects their capacity to grow their wealth and income, and has significant implications for people’s lifestyle choices. Financial literacy also has a significant part to play in influencing how financial institutions – such as banks, non-bank deposit takers and insurers – manage their affairs and what products they provide. Because financial literacy influences people’s investment decisions, including risk/return tradeoffs, it also affects how resources in the economy are allocated. In turn, this has implications for the potential growth rate and stability of the economy. Accordingly, the main theme of this article is that financial literacy matters – at many different levels. The focus of this article is on financial literacy at the household and individual level. Research raises some concerns regarding financial literacy in New Zealand. The evidence suggests that many New Zealanders have limited financial literacy. The Retirement Commission and other government agencies are working to improve financial literacy levels. The private sector has also taken initiatives in this area. Work is under way to strengthen the regulation of financial advisers and to improve financial disclosure by issuers of securities to the public. However, there appears to be a need for further initiatives to raise the level of financial literacy in New Zealand. These initiatives should be accompanied by others to improve the delivery of user-friendly financial information to investors and consumers. This article explores the potential for further work in these areas.

Suggested Citation

  • Doug Widdowson & Kim Hailwood, 2007. "Financial literacy and its role in promoting a sound financial system," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, June.
  • Handle: RePEc:nzb:nzbbul:june2007:5

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Antoneta POLO & Dorjana NANO, 2015. "The Role Of University On Students Money Management Practices," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 87-96, December.
    2. Janice Burns & Maire Dwyer, 2007. "Households'attitudes to savings, investment and wealth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, December.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzb:nzbbul:june2007:5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.