Introduction

I will start right off with a cold definition. Financial education "is a process through which consumers, savers, and investors improve their understanding of financial products and the concepts behind them, and through instruction, information, and advice develop attitudes and knowledge to understand the risks and opportunities for making informed choices, where to receive support or help in making those choices, and what actions to take to improve their status and level of protection" (OECD).

More simply, "Financial education is the ability to understand and apply different financial skills effectively, including personal financial management, budgeting, and investing."

I am Italian and I live in Italy. The latest analysis carried out by Standard and Poor's and the World Bank is merciless. Italy is 63rd in the world for the population's knowledge of financial mechanisms. It's not just a question of knowing how to make an investment or exploit a financial instrument to try to get rich, it is actually about the basic knowledge needed to manage savings. This implies, in fact, that most Italians are completely at the mercy of financial institutions (banks).

According to one survey, in Italy, only 37% of adults have at least a minimal knowledge of finance. The financial literacy rate is 68% in Canada, 67% in the UK, 66% in Germany, 64% in Australia, 57% in the US, 52% in France and 49% in Spain. Scandinavian countries have the best rates in the world, as, all together they boast 71% of the population having finance knowledge at a basic level.

The above analysis concerns concepts such as numeracy, risk diversification, inflation and interest. It was not a question, therefore, of investigating concepts of high finance, but of competence regarding the most basic economic notions that are nevertheless important in everyday life. Basic concepts that should be part of the common vocabulary of an average citizen. And yet, this is not the case. But why is it important to know how to deal with concepts such as inflation and interest?

The dossier explains that while those with a certain financial literacy are able to make informed and reasoned decisions about their savings, investments and spending, people without the most basic financial concepts are incapable of handling even the simplest of financial tasks. This means they risk making serious mistakes with dramatic consequences.

Financial ignorance can bring with it truly significant costs. In fact, consumers who fail to understand concepts such as compound interest, inflation or risk diversification often find themselves spending more on unnecessary financial transactions, thereby accumulating debt.

"Education is the great engine of personal development. It is through education that a farmer's daughter can become a doctor, a miner's son a mine boss, or a child born into a poor family the President of a great nation. Not what we are given, but the ability to make the most of what we have is what distinguishes one person from another." (Nelson Mandela)

A few months ago, I read an article that reported on a survey conducted in Italy in the pre-Covid period. More than 36.6% of those interviewed did not have sufficient resources to face more than two months without income and two families out of ten did not have the financial means to face one month without income. Three in ten of the households surveyed would find it difficult to cope with a medium-sized unexpected expense and 35% said they felt anxious about their financial situation.

Now, I do not know what the situation in other countries is, the percentages are probably lower in many places, but what I do know is that there are still too many families that could live a better life if they had the knowledge to do so. Instead, they struggle to make ends meet or have to get into debt with banks.

I am not here to tell you what to do, I am neither a financial advisor nor a family banker. I have simply accumulated my experience and knowledge, derived from reading several books written by those more knowledgeable than me. Here, I have created a sort of path that will lead anyone who wants to change their relationship with money to greater knowledge and awareness of how to do so.

Although some of the changes outlined here will seem impossible to implement into daily life, you must believe me that having conviction and determination will enable you to achieve the goal you have set for yourself. Nothing you will read in the next "chapters" will be impossible.

But enough of the chatter, it's time to get started. I wish you all a happy reading and hope this advice may benefit you.