What is Financial Literacy?

Blog banner image with a woman showing her phone that shows houses. Text below reads "What is financial literacy?- Where to start"

There is no denying that the cost of living is increasing, and many factors outside our control lead to this. We know people are finding it more difficult to make ends meet. Many commentators tell us to be clever with our finances or be financially savvy – but what does that mean? 

How do you know if you have the skills to be financially savvy?  

The mention of personal finances and numbers might be enough to send a shiver down your back. The idea of personal finances could be overwhelming to the point where you just don’t deal with them. You’re not alone, and that is where we can step in to help.  

By the end of this blog, you can identify how financially savvy you are. We will share a few tips and resources to help you learn more.   

Financial literacy is another way to describe being financially savvy, and we will refer to it as financial literacy for the rest of the blog. In this blog, we make reference to savings and pensions to give a holistic view of financial literacy; however, our focus will be more on short-term planning, earning and budgeting. 


What is financial literacy? 

According to the National Bureau of Economic Research (2013), financial literacy is “peoples’ ability to process economic information and make informed decisions about financial planning, wealth accumulation, pensions, and debt.” 

So, let’s break this down. 

Financial literacy is understanding how money works—how it is earned, managed and spent. 

Five components of financial literacy 

There are 5 critical components of financial literacy: 

  • Earn.  
  • Spend.  
  • Save.
  • Borrow.  
  • Protect.


Before you start doing anything with your money, you need to know how much money you have coming in each week or month.  

If you’re working, this can be done by looking at your wage slip. Note any deductions, such as health insurance or a pension contribution. You should learn more about the taxes you are paying, and HR or the person responsible for payroll should be able to provide more information.  

If you are unemployed, you should ensure that you are getting the correct social welfare support and allowances.  

What can you do here? You might be entitled to additional social welfare support based on your situation. Have you applied for all your tax credits? You can get help from your local MABS office or your local Citizens Information Centre.


Once you know how much money you have coming in, you need to keep track of your outgoings. You can keep it simple and use a pen and paper to help you keep track of your weekly or monthly spending.

This will help you see if there are areas of spending that you could reduce. Or some spending that you could cut out and divert to other areas, such as increasing your savings or increasing pension contributions.

We know saving at the moment might not seem like an option. This can be true in many cases. Reviewing where you are spending money might help you to redirect money into other priorities and any savings you can make will help to build a small rainy day fund.

Once you have kept track of your spending, you can create a weekly or monthly budget to help you stay on track. Check out our budgeting tools to help you get started.

Use a pen and paper to keep a note instead or use the notes app on your phone. The important thing is that you are keeping track to review later.  

You can review historic spending using your bank statements. Get your bank statements from the beginning of the year. Sit down with your favourite cuppa and go through them to better understand your spending.  

Remember, when people are finding it difficult to make ends meet, we recommend prioritising spending and debts.


Everyone knows it’s important to save money. Sometimes, it can be hard to spend less than you have coming in. Having a clear picture using a budget can help set specific financial goals to work towards.  

Your financial goals will depend on your situation and can include things like:  

Saving is a skill; start small and get into a regular savings habit or set yourself a savings challenge.


Most of us will, at some point, need to borrow money no matter how good we are at saving. It might be for a car, a mortgage to buy a house, a wedding, and so on.  

When you are borrowing, it is important that you understand things like the interest rate and what happens if you can’t afford to make the repayments. It is a good idea to talk with a financial adviser before borrowing to understand what you are getting into. We have a helpful resource to help you prepare before you borrow.  

Remember, borrowing isn’t bad, but it is important to know how to compare loans and maintain a clean credit report.  

The Competition and Consumer Protection Commission (CCPC) offers comparison tools for loans, credit cards and different types of bank accounts.  



Once you’ve set yourself up with a budget and savings plan, it’s important to protect the money you’ve made. This can mean regularly checking your bank accounts and credit card statements for mistakes or suspicious activity.  

Beware of fraudsters trying to take your money by tricking you by clicking on suspicious links in text messages or if a stranger asks for your account details over the phone. FraudSMART provides a website dedicated to information on the latest scams and what to do if you believe you are a victim of fraud. 

You can take out insurance to protect you in case of emergencies.  


Am I financially literate? 

There are a few questions to ask yourself to assess if you are financially literate:

  • Do you know how to make a budget for yourself? 
  • Do you have an emergency fund covering at least three months of basic living expenses?  
  • If you have debt, do you have a plan to pay it off?  
  • Do you understand interest rates and APR? 
  • Do you have a plan for your living expenses in retirement?  


Don’t worry if you can’t answer yes to these questions. You are not alone. Use the list of questions as an opportunity to find the answers and keep a note.  

Remember, this is not a test. We know it will be more challenging to answer ‘yes’ to some of the questions above. Take it slowly and at your pace, and before you know it, you’ll be a little savvier with your money.

Why is financial literacy important? 

Financial literacy is a good skill because it gives us the ability and knowledge, we need to manage our money efficiently. It improves our financial well-being as well as our overall well-being. Providing us with knowledge and skills to feel in control of our finances and feel financially secure both now and in the future.  

According to NALA, one out of every two adults in Ireland has trouble with financial literacy.  

A lack of financial literacy can lead to people making poor financial decisions. They can become victims of predatory lending, leading to marks on their credit report and large amounts of debt. Poor financial literacy can also lead to income inadequacy issues in later life if we fail to plan for retirement and old age.

So, what can affect our financial literacy? There can be many obstacles for people in managing their money and accessing quality financial services. These include having literacy or numeracy issues. Or not having adequate computer skills or access to technology or the internet. 

How can we improve our financial literacy? 

We can improve our financial literacy by taking some time to learn more about our situation. For example, if you don’t have a budget to start there, we have various tools on our website to help you get started or get in touch with us; we’d be happy to help.   

You can speak to a financial adviser about planning for your future or a pensions adviser to learn more about pensions.

While education plays a huge role in financial literacy, financial institutions also have a role in improving financial literacy. They can provide financial information in clear, plain English, avoid using financial jargon, and provide products that cater for all.  


How can I learn more?  

The National Adult Literacy Agency (NALA) has a website, www.learnwithnala.ie which has free QQI accredited courses in English, maths, computers and many other courses, including a QQI Level 3 Managing Personal Finance module. All courses have free tutor support.  

You can also contact the Adult Education Service section of your local ETB, which offers similar classroom-based courses.  

You can visit www.ccpc.ie to learn more about your consumer rights and money comparison tools.  

The CCPC also offer a lunchtime personal finance talk called Money skills. Money skills for life is a free one-hour personal finance talk developed by the CCPC to provide financial education to employees with the support of their employer. If you have any questions, please email bookings@ccpc.ie or call Colin on 01-470 3615. 

The Pensions Authority website offers information and guidance material to help you understand pensions.  

Contact Us 

If you have a query for one of our advisers or are struggling with your debts, you can call the MABS National Helpline on 0818 07 2000 Monday to Friday, from 9am to 8pm, or find the contact details for your local office. More information is available on our website.



In this blog, we refer to pensions – MABS do not offer pension advice and advise that you speak with a pension or long-term planning financial adviser as it is a highly specialised area.

This blog does not represent legal advice and is intended for guidance only. If you are concerned about your current or future personal financial situation then please contact an adviser from MABS

Note: We welcome references to and use of the content in this blog. However, please reference MABS, and link said content if you choose to do so.