Financial education is an essential component for the economic and social development of nations. In an increasingly interconnected world, understanding how personal finances and markets operate is an indispensable skill for individuals and economies alike. However, in countries like Colombia, the lack of financial education negatively impacts financial inclusion, investment, and economic growth. From a liberal perspective, this issue can be analyzed through the principles of authors like Leonard Read, Friedrich Hayek, and Milton Friedman, who emphasize the importance of individual choice and free markets as engines of progress.
Financial Education: A Tool for Economic Freedom
Leonard Read, in his iconic work I, Pencil, illustrates how markets enable cooperation among millions of people, even without direct interaction, to produce complex goods and services.
Similarly, financial education equips individuals to understand this system, empowering them to participate more effectively in the economy. Without basic knowledge of concepts such as compound interest, savings and investment, people cannot make informed decisions to maximize their well-being. The lack of financial education not only limits individual potential but also restricts markets’ capacity to generate wealth and growth.
Friedrich Hayek contributes to this discussion with his concept of “dispersed knowledge.” According to Hayek, knowledge does not reside in a central authority but is fragmented across society. Financial education, therefore, should not be viewed as a set of top-down rules but as a means for individuals to acquire the tools needed to interpret and use the knowledge available in markets. A financially educated citizen can act autonomously, making decisions that not only enhance their personal well-being but also contribute to market dynamism.
The Impact of Financial Education Deficiency in Colombia
According to the World Bank, approximately 2.5 billion people worldwide do not use formal financial services, and 75% of the poor do not have a bank account. Inclusion is key to reducing poverty and fostering prosperity. In Colombia, access to the financial system remains limited. According to data from Banca de las Oportunidades, in 2023, 15% of the adult population still lacked access to basic financial services such as savings accounts. Moreover, many individuals who access credit are unaware of how to manage their debts, leading to over-indebtedness problems. This not only affects families but also creates inefficiencies in the financial system and limits economic growth.
Milton Friedman, in Capitalism and Freedom, notes that a market-based economic system depends on individuals making rational decisions. Without financial education, this rationality is compromised, affecting both consumption and investment. In this context, financial education should be seen as a strategic investment to empower citizens and strengthen the national economy.
Financial Education and Investment: A Virtuous Circle
Financial education not only fosters saving but also promotes investment, a fundamental pillar of economic development. Hayek argued that savings and investment are essential for capital accumulation and innovation. In Colombia’s case, improving financial education would allow more people to participate in the stock market, invest in ventures, and generate employment.
Moreover, in a global context where technological innovation and the digital economy are redefining markets, financial education enables citizens to seize opportunities in areas such as crypto assets, crowdfunding, and e-commerce. These tools can serve as catalysts for Colombia to diversify its economy and reduce dependence on traditional sectors such as extractive industries.
Financial education is more than a practical tool; it is a pathway to ensuring economic freedom and social progress. As Leonard Read emphasizes, every economic choice we make is interconnected with millions of others’ decisions. For these choices to yield the best outcomes, citizens must be empowered with the necessary knowledge.
Colombia, and the world, face the challenge and opportunity of strengthening their populations’ financial education. This effort will not only drive economic development but also help build freer societies where individuals can fully enjoy the fruits of their labor and creativity. Ultimately, financial education is not just a matter of individual well-being but a driver for sustainable growth and shared prosperity.
Omar Camilo Hernández Mercado is a law student at the Universidad Libre de Colombia, Senior coordinator of Students for Liberty in Colombia, and a seminarist in “The Austrian School of Economics” at the International Bases Foundation.
