In the new world, wealth management is more important than the amount of wealth that comes into the hands of the individual as income, so financial awareness has become a necessary skill to avoid falling into the trap of poverty and one of the most important life skills. Scientific research confirms that there is a direct relationship between financial awareness and poverty. Financial awareness means the ability to understand, evaluate, and use financial information so you can make sound decisions about income, expenses, savings, debt, profit margins, and investment risks.
Financial awareness is not just information; The OECD (Organization for Economic Cooperation and Development) defines financial awareness as a combination of knowledge, knowledge, skills, attitudes and behaviors that help individuals make conscious financial decisions and develop and implement a more solid plan for the solar financial future.
This definition and understanding is important because it shows that often the financial problems of individuals and families are not only due to lack of income, but also “lack of knowledge, skills and lack of planning” that brings individuals and families closer to the poverty line. From an academic perspective, research shows that financial awareness is a kind of human capital of a country and makes individuals in that society more financially aware, have a better life, less dependent on the government and be able to use their income well.
This will motivate the financially conscious individual to reduce financial mistakes, understand the rate of profit and risk and choose the most appropriate type of investment for different stages of life, which has a direct positive impact on the welfare of individuals and families. This scientific study confirms this Lusardi, Mitchell (2014).
An OECD/INFE 2023 report found that people with good financial awareness are on average 10% more financially well-off and 15% more resilient to financial crises than those with lower levels of financial awareness. This means that financial awareness can have a direct impact on stability, financial pressure and the ability to cope with poverty and crisis.
In Iraq and countries with less developed financial systems, financial awareness is more important, so the Comprehensive Financial Strategic Plan 2025–2029, published by the Central Bank of Iraq, identifies “consumer protection and financial awareness” as one of the key themes of financial system development. The same document notes that Iraq needs appropriate financial services that are low-cost and consistent with Iraqis' religious and cultural values.
For Iraqi citizens and all those living in a country where the financial and justice system is not properly developed and the state does not take proper financial responsibility for the present and future of citizens For retirement and emergency, family, health and education.
Of course, the first step to fulfilling this responsibility begins with financial awareness. And financial awareness begins with three basic and effective steps:
First, having a financial plan that fits the person's life.
Second, a scientific understanding of the risks and returns of investment.
Third, implement the financial plan you have set for your life (in the first point) Most individuals and families fail to implement the financial plan and are at risk of poverty.
Practical steps:
It is important for every individual and family to ask themselves: “What is the risk of poverty and financial crisis for me and my family if I lose my job or become chronically ill?”
The answer is clear: the first step out of poverty is financial awareness, and the result of financial awareness must be a practical step, which is investment.