Financial planning in global market

1.0 Introduction

Financial planning means preparing for your future by making informed

money management decisions in the present. There are many tools available
that will help you achieve the security you desire – but none are as important
as simply taking a steady and committed approach to funding your long-
term goals.

Nowadays in the business environment they are many aspect effect the
especially in the global market. They are many financial aspects that are link
with the changes of the market global. The financial aspects that link in the
global market: financial literacy, monetary attitude, financial practices and
financial well being. The first step toward planning for your financial future
is to understand where you are today.

2.0 Learning about financial literacy

Financial literacy is the ability to understand finance. Raising interest in

personal finance is now a focus of state-run programs in many countries
including[1] Australia, Japan, the United States and the UK. The
Organization for Economic Co-operation and Development (OECD) started
an inter-governmental project in 2003 with the objective of providing ways
to improve financial education and literacy standards through the
development of common financial literacy principles.

Consumer financial literacy has become a growing concern to educators,

community groups, businesses, government agencies, and policymakers.
Correspondingly, there has been an increase in the number and types of
financial education programs available to households. Many of these
programs focus on providing information to consumers and operate under
the implicit assumption that increases in information and knowledge will
lead to changes in financial-management practices and behaviors.
Based on article written by Marianne A. Hilgert, Jeanne M. Hogarth, and
Sondra G. Beverly, focuses on four financial-management activities;
• cash-flow management,
• credit management,
• saving, and
• Investment.

Data from the Surveys of Consumers are used to analyze some of the
connections between knowledge and behavior-what consumers know and
what they do.
Overall, financial knowledge was statistically linked to financial practices:
Those who knew more were more likely to engage in recommended
financial practices. In addition, certain types of financial knowledge were
statistically significant for particular financial practices--knowing about
credit, saving, and investment was correlated with higher probabilities of
engaging in recommended credit, saving, and investment practices
respectively. Although the causality could flow in either direction, this
finding indicates that increases in knowledge may lead to improvements in
financial-management practices. Thus, financial education in combination
with skill-building and audience-targeted motivational strategies may be one
way to elicit the desired behavioral changes in financial-management
practices.

Attention to financial literacy has grown in recent years, in large part

because technological, market, and legislative changes have resulted in a
more complex financial services industry that requires consumers to be more
actively involved in managing their finances. Consumer and community
interest groups, banking companies, government agencies, and
policymakers, among others, have become concerned that many consumers
lack a working knowledge of financial concepts and the tools they need to
make decisions most advantageous to their economic well-being.

Such financial literacy deficiencies can affect an individual’s or family’s

day-to-day money management and ability to save for long-term goals such
as buying a home, seeking higher education, or financing retirement.
Ineffective money management can also result in behaviors that make
consumers vulnerable to severe financial crises.

As a result, considerable resources have been devoted to financial literacy,

with a wide range of organizations providing training, including banks,
consumer and community groups, employers, and government agencies.
Overall, studies suggest that financial literacy training can lead to better
decision making; however, the findings raise numerous questions about the
best means of providing that training, the most appropriate setting, and the
most opportune timing. Findings from recent research on personal money
management styles, combined with awareness of human behavioral traits,
offer insights that may be useful in developing successful training programs
and strategies

As concern about financial literacy has increased, so too have the number
and variety of financial literacy training programs and program provider
some offering comprehensive information on savings, credit, and similar
topics for a broad audience and others tailored to a specific group, such as
youth or military personnel, or focused on a specific goal, such as home
ownership or savings.

The forces of technology and market innovation, driven by increased

competition, have resulted in a sophisticated industry in which consumers
are offered a broad spectrum of services by a wide array of providers.
Compelling consumer issues, such as the very visible issue of predatory
lending, high levels of consumer debt, and low saving rates, have also added
to the sense of urgency surrounding financial literacy.

Other important demographic and market trends contributing to concerns

include increased diversity of the population, resulting in households that
may face language, cultural, or other barriers to establishing a banking
relationship; expanded access to credit for younger populations; and
increased employee responsibility for directing their own investments in
employer-sponsored retirement and pension plans.
The challenges for policymakers and educators in designing and delivering
financial literacy education to meet the needs of all groups within the
population are many. The elements that must be considered can be defined
broadly in a set of questions:
• Who is the targeted audience and what are the group’s information needs?
• What does the audience need to know to understand personal financial
circumstances, identify future goals, and implement behaviors consistent
with attainment of those goals?
• When is the appropriate time to expose individuals to both general and
specific information about financial issues and options?
• Where should financial literacy education be provided to reach the broadest
audience?
• How can financial literacy education be effectively delivered, both at
specific points in time and over time, to assist households in adjusting their
financial plan to suit their circumstances?
• How can the effectiveness and impact of financial literacy programs be
measured?

The task, which may appear simple when reduced to a series of bullet items,
becomes complex when these variables are considered simultaneously or the
multiple implications of just one variable are evaluated fully. For example,
in considering where to introduce financial management topics to youth, the
public school system may seem a logical place. However, issues of funding
and teaching priorities complicate the use of this venue. Even when states
mandate personal finance education, the question remains of how to
incorporate training into existing student curricula, as specific requirements
related to academic performance and the desire to offer worthwhile but
competing electives, such as foreign languages and music, may leave little
room for a separate course. Similarly, while research identifies the
workplace as an effective venue for extending financial literacy to adults, the
existence of workplace programs is dependent on management philosophy
and corporate culture, and as a result, programs may not be available to large
segments of the population.

The challenge of providing financial training to adults is particularly vexing

in light of the wide variety of information needs arising from differences in
prior experience, language and cultural background, current financial
situation, and time availability, given work and family commitments. The
wide variation in needs also poses challenges in the development and
delivery of relevant information. Most classroom-style programs take a
‘‘one size fits all’’ approach, in a well-intended effort to provide as much
information as possible in a limited amount of time. Such training may not
be enough for some participants and too much for others. Many education
providers use the Internet to offer resources and referrals, allowing
consumers to choose, among a range of topics, the information that best suits
their needs. But this approach has limited utility for consumers who cannot
access a computer, have limited language or reading skills, or need a more
personalized training experience.

In an ideal world, financial educators would analyze each individual’s needs

and provide customized training based on that assessment. But such one-on
one interaction is time- and resource- intensive. Thus, educators are seeking
other ways to analyze consumer needs more effectively and deliver pertinent
information more efficiently. One approach might parallel in some ways the
use of a credit-scoring model in loan underwriting, which has enabled
lenders to quickly and effectively construct an individual risk profile. A
similar approach might be taken in determining a consumer’s financial
literacy profile, with a database on an individual’s or group’s financial
status, behavior, and learning preferences used to identify an individual’s
information and educational needs. Knowledge of those needs, coupled with
an assessment of the individual’s motivation and confidence, could assist in
providing relevant financial information at the appropriate time.
The development of consistent standards for measuring results, too, could
increase the success of financial literacy programs. Practitioners who can
demonstrate the effectiveness of their programs can contribute significantly
to the identification of ‘‘best practices’’ and the setting of policies that may
lead to consumers who are better equipped to survive and, more important,
thrive in our vibrant, diverse, complex financial marketplace.

Financially educated consumers are better able to make good decisions for
their families and thus are in a position to increase their economic security
and well-being. Financially secure families are better able to contribute to
vital, thriving communities and thereby further foster community economic
development. Thus, financial education is important not only to individual
households and families but to their communities as well.
Amid growing concerns about consumers’ financial literacy, the number and
types of financial education programs have grown dramatically since the
mid-1990s. Many of these programs focus on providing information to
consumers and operate under the implicit assumption that increases in
information and knowledge will lead to changes in financial management
practices and behaviors.
To look at the different types of financial practices, measures of financial
management behaviors and financial product ownership were combined.
Practices were categorized as cash-flow management, credit management,
saving, investment, and other.

Financial knowledge can be statistically linked to financial practices related

to cash-flow management, credit management, saving, and investment—
those who knew more had higher index scores, and those who learned from
family, friends, and personal experiences had higher index scores. It is worth
noting that certain types of financial knowledge were found to be
statistically significant for particular financial practices. With the exception
of the cash-flow management practices, which did not have a corresponding
subsection on the quiz, the relationships between specific financial
knowledge scores and the corresponding financial practices indexes were
statistically significant. Thus, knowing about credit, saving, and investment
was correlated with having higher index scores for credit management,
saving, and investment practices respectively. This pattern may indicate that
increases in knowledge and experience can lead to improvements in
financial practices, although the causality could flow in the other direction—
or even both ways. One way to increase knowledge is to gain experience.
And one way to gain additional education is to learn from the experiences of
others, as can happen in classes and seminars and through conversations
with family and friends. There is a difference between providing information
and providing education. Education may require a combination of
information, skill-building, and motivation to make the desired changes in
behavior. The distinction between information and education is an especially
important point for policymakers and program leaders making decisions
about the allocation of resources. Financial education awareness campaigns
and learning tools (for example, web sites or brochures), all important in
their own right, may need to be coupled with audience-targeted motivational
and educational strategies to elicit the desired behavioral changes in
financial-management practices.

Stress-related variables tend to impact each other. According to Williams

(1982), financial problems result from unexpected changes which necessitate
reevaluation of the use of resources. It is not surprising that many of the
"situations" outlined by Williams are also stress related variables. For
example, situations which may create severe financial problems include:
changes in family income, changes in employment status, unscrupulous or
fraudulent schemes, adverse job politics, loss of ability to fulfill home
responsibilities, need to support parent or other persons, premature death of
spouse, birth of child, illness or disability, accidents, divorce, major
unexpected bills, lawsuits, and changes in consumer prices.

According to Williams (1982) also, specific situations that cause financial

stress include: underestimating expenses because of inexperience or poor
records, overestimating income, lack of family communications, being
overwhelmed with bills and expenses to the point of being afraid, inability to
say "no", lack of planning, buying products and services on credit, poor
money handling skills, credit overextension, using money for emotional
reasons, not having a cash reserve for emergencies, and not controlling
expenses such as gambling, alcohol, tobacco, and drugs. Stress inducing
variables eventually have an impact on a family's financial well-being,
which in turn, influences individual response to stressful situations. For
example, an individual who faces increasing levels of stress will, according
to the literature, be more likely to miss work on a regular basis. This action
tends to increase feelings of guilt, resentment, and loss of hope. Many such
individuals turn to alcohol, gambling, tobacco, or drugs to dampen the
effects of stress in their lives. Factors contributing to stress are cumulative
and interlinking. Consequently, when employees exceed their coping
threshold for stress, it is likely that workers' compensation claims—both
legitimate and fraudulent—will increase (Gilmore, 1994). Unfortunately,
these activities force reallocation of financial resources towards the
maintenance of unhealthy habits. In turn, poor financial management leads
to increasing levels of stress, which tend to support other types of behavior,
further reducing employee productivity. In other words, the relationship
between stress, stress-related variables, poor financial management, and
overall reduced employee productivity is not linear; it is, in fact, a spiraling
sphere which ultimately leads to physical, financial, and employment failure.

Changing family structures will have an impact on the well-being of the

older population now and into the future. Changing family structures also
influence the need for formal support systems. There are several alternative
forms of family and generational structure that are shaped by changes in
marital status, fertility, mortality and migration. Much of the research has
focused on the traditional paths through the life course (e.g., marriage,
bearing children and widowhood) and has not considered the alternative
pathways and their consequences on living arrangements and well-being in
later life.

3.0 Conclusion

Changes over time in living arrangements and caregiving patterns appear as

responses to changes in other spheres of life. Demographic trends in fertility,
mortality and migration have an impact on family size and household
structure, especially as these trends interact with changing gender roles,
increased education and expanding employment opportunities. In “older”
industrialized countries, current elderly cohorts have lived through a
complexity of twentieth-century changes, and this is reflected in the pattern
and diversity of living arrangements that have emerged. The major question
today in industrialized societies is whether the observed trends in living and
care arrangements will (and, in a qualitative sense, “should”) continue. In
less industrialized countries, many of the social changes associated with
modern economic development are fairly recent phenomena: the overarching
question in these countries is whether the basic family structures will come
to resemble those of the so-called Western model. These questions have
policy implications as government and other agencies grapple with how best
to plan for the inevitable growth in the older population.