Financial Literacy / Financial Acumen

What are financial literacy and financial acumen?

Like other forms of literacy, financial literacy is about a foundational but sound understanding of the subject matter rather than in-depth expert knowledge. Financial literacy or acumen refers to the ability to make informed financial decisions, by having an understanding of basic accounting and financial principles and being able to analyse the potential impact of financial decisions.

Being financially literate means being able to plan and budget for a project, understand how to interpret financial statements, prepare reports and know basic accounting terminology. Financial acumen is both a life skill as well as a professional skill, as it contributes to success both in your personal life as well as your career.

Why are financial literacy and financial acumen important in the workplace?

Many employees assume that because they are not in the financial department of their organisation, they won’t need to understand or be involved in any financial matters. However, making decisions on expenditures, managing projects, or asking management for additional resources for your team all involve financial decision making and require financial acumen to achieve the desired outcomes. By gaining financial literacy, employees can better manage their projects, measure their impact and argue more effectively for additional resources when needed.

Additionally, financial literacy is a must for managers, small business owners and other leadership roles, as they need to have a sound understanding of the financial situation of the business in order to make the right decisions.

For businesses, financially literate employees are invaluable, as they make more sound choices, can liaise more easily with the finance department and are capable of assessing the financial impacts of their work. Considering that only 42.5% of Australians were able to answer five basic financial literacy questions correctly in a 2018 University of Melbourne study, it is clear that there is a large skills gap, meaning that well-established financial skills can give applicants an edge over others.