CHAPTER 1:

INTRODUCTION

1. Background of the study
Current economic conditions have raised serious concerns about financial security, especially the managers and individual who lack the skills and resources to withstand financial market downswings and take advantage of upswings. Individuals and managers are taking responsibility for a growing number of financial decisions, the two most important arguably being the purchase and financing of their day-to-day financial activities.
In recent years, financial literacy has gained the attention of a wide range of major banking companies, government agencies, grass-roots consumer and community interest groups, and other organizations. Interested groups, including policymakers, are concerned that consumers lack a working knowledge of financial concepts and do not have 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. From a broader perspective, market operations and competitive forces are compromised when consumers do not have the skills to manage their finances effectively. Informed participants help create a more competitive, more efficient market. As knowledgeable consumers demand products that meet their short- and long-term financial needs, providers compete to create products having the characteristics that best respond to those demands.
However, other researchers argue that financial literacy is a secondary concern when it comes to decision making, partly because evidence on financial education programs has been mixed. Early evaluations, notably by Douglas Bernheim and a series of coauthors, suggested that workplace financial education initiatives increased participation in savings plans (Bayer et al., 1996; Bernheim 2003), while financial education mandates in high school significantly increased adult propensity to save (Bernheim et al., 2001).
A large part of this debate may be linked to the fact that a great deal of variation continues to exist in how researchers define and measure financial literacy itself. Previous surveys that are purposively designed to measure financial literacy (such as the Washington Financial Literacy Survey, the Jump$tart Coalition Survey, or the Survey of Consumer Finances 2001 module) rarely also collect sufficiently detailed information on individuals’ financial education and variables related to financial decision making.
This research will exposed a lot of importance issues encompassed to the effect of the financial literacy and the manager’s performance. The reader will be knowledgeable about the impact of financial knowledge on decision making, those with the experienced makes relevant decision compare to those without having the financial literacy knowledge. The research exposed and highlighted different views from the scholars about the benefit and the essential reasons for the managers and individual most learn about financial literacy for their future life.

1.1. Problem Statement
The main purpose that individuals and managers do not engage in planning for the varies capital management for the purpose of right decision making that will impact increment of their resources possess or are not knowledgeable about the terms of financial institutionalization is that they lack financial literacy. Bernheim (1995, 1998) was one of the first to emphasize that most individuals lack basic financial knowledge and numeracy. Several surveys covering the U.S. population or specific sub-groups have consistently documented very low levels of economic and financial literacy. The National Council of Economic Education (NCEE) periodically surveys high school students and working age adults to measure financial and economic knowledge. The survey consists of a 24-item questionnaire on topics including “Economics and the Consumer,” “Money, Interest Rates and Inflation,” and “Personal Finance.” When results were tallied using standard grading criteria in 2005, adults had an average score of C, while the high school population fared even worse, with most earning an F. These findings are confirmed by the Jump$tart Coalition for Personal Financial Literacy survey, which also documents very low levels of basic literacy among U.S. high school students (Mandell, 2004). Hilgert, Hogarth and Beverly (2003) examine data from the 2001 Survey of Consumers, where some 1,000 respondents (ages 18–98) were given a 28 question true/false financial literacy quiz, covering knowledge about credit, saving patterns, mortgages, and general financial management.