Poor people often borrow money to make ends meet, but their debts add a burden they struggle to pay back. As these people juggle with financial issues, surely better money management – that they can learn through financial education – should help improve their situation.
But this logic fails to consider that poverty has many dimensions: lacking money is only one of them. As numerous studies have shown (World Bank, Oxford University, ATD Quart Monde), lack of access to infrastructure, hygiene, health centres, lack of educational achievement, balanced and sufficient food, all are part of poverty.
Besides, financial education does not address any systemic causes of poverty: knowing how to budget and prioritise expenses does not make up for a salary which is only paid from time to time or for wages below living standards. It does not help access water and electricity for people living far from the grid. It may even slow down the implementation of poverty reduction measures when resources are put into financial education while they could be spent on infrastructure or advocating for living wages for instance.
However, for people just above poverty line, those who start earning a monthly salary for example, financial education can have a significant impact. By keeping enough for commitments, avoiding loans especially for consumer goods, being careful with scams, financial education can help people stay above poverty line.
Moreover, financial education should broaden its scope and target wealthy people and companies to make them aware of their financial footprint: when the wealthier strive to manage their money ‘well’ and reduce their expenses, they also deprive poorer people of potential revenues; when they optimise their taxes, they deprive them from infrastructure and welfare safety nets. Financial education should shift from an individual money management view to raising financial empathy: we are all part of one interconnected financial system.