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Targeting the unbanked-financial literacy's magic bullet?

Author

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  • Tatom, Jojn
  • Godsted, David

Abstract

Adult financial illiteracy is a major problem in the US and elsewhere. Financial fraud and poor performance in managing personal finances go hand in hand. The nation’s bankruptcy and home mortgage foreclosure rates rate have continued to climb despite improving employment opportunities, rapid growth in the nation’s income and bankruptcy reform aimed at making bankruptcy filing less necessary and more difficult. America’s personal savings rate hovers in negative territory. As new financial services and technologies proliferate, many low income persons are being left in the dust, often unable to participate in cost saving or high-return opportunities, or they are offered new services only on very unfavorable terms. At the same time, lack of financial and technological safeguards has made it easier to exploit all individuals through identity theft, mortgage fraud, or legal, but financially dubious, new products. In some cases, new technology is being forced on low-income individuals by a coordinated federal push for electronic payment of benefits. While an imposition on the otherwise unbanked, increasing access to financial institutions may provide a useful introduction to a higher level of financial information and literacy, as well as enhancing their confidence and ability in financial management.

Suggested Citation

  • Tatom, Jojn & Godsted, David, 2006. "Targeting the unbanked-financial literacy's magic bullet?," MPRA Paper 4266, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4266
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    File URL: https://mpra.ub.uni-muenchen.de/4266/1/MPRA_paper_4266.pdf
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    References listed on IDEAS

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    1. Buda, Rodolphe, 1999. "Market Exchange Modelling Experiment, Simulation Algorithms, and Theoretical Analysis," MPRA Paper 4196, University Library of Munich, Germany, revised 2000.
    2. Buda, Rodolphe, 1994. "La modélisation macroéconomique comme processus de communication : pour une formalisation finaliste des équations de comportement," MPRA Paper 3995, University Library of Munich, Germany, revised May 1997.
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    Cited by:

    1. Maria Semenova & Victoria Rodina, 2013. "Informal loans in Russia: credit rationing or borrower’s choice?," HSE Working papers WP BRP 14/FE/2013, National Research University Higher School of Economics.

    More about this item

    Keywords

    Unbanked; financial literacy; financial institutions; bank deposits;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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