The Hidden Price of Ignorance

The real tragedy is not that people are poor. It’s that they are poor and uninformed—trapped not just in scarcity, but in a system that hides the rulebook.

• Financial literacy is not about wealth—it’s about well-being. It empowers the farmer in Badin, the clerk in Quetta, the teacher in Sukkur, and the housewife in Peshawar to make smarter decisions, resist exploitation, and build futures with dignity.

By Abdullah Usman Morai | Sweden

What They Never Taught Us

Imagine this: a 25-year-old young man from rural Pakistan lands his first job in Karachi. Overjoyed with the idea of earning Rs.50,000 a month, he opens a bank account, buys a new phone on installment, and rents a room in the city. Within six months, he’s knee-deep in credit card debt, skips meals to pay bills, and has no savings to send home or invest in his future. The reason? He was never taught the basic principles of budgeting, credit, or compound interest.

This story isn’t uncommon. It echoes through low-income neighborhoods, rural communities, and even among educated urban dwellers. In an age of economic uncertainty, rising inflation, and digital finance, financial illiteracy isn’t just a personal handicap—it’s a national crisis.

This article explores how personal finance knowledge—or the lack thereof—affects not just individuals but entire economies, highlighting real-life examples and offering pathways forward.

What is Financial Literacy, and Why Does it Matter?

At its core, financial literacy is the ability to understand and effectively use financial skills, including budgeting, saving, investing, borrowing, and understanding risk. It empowers people to make informed decisions about their money and prepares them for emergencies, long-term goals, and everyday expenses.

A financially literate person understands:

• The difference between needs and wants
• How compound interest works (both in loans and savings)
• Why savings matter
• How to avoid debt traps
• The importance of insurance and retirement planning

Without this knowledge, people become easy prey for exploitative lending, impulsive consumption, and emotional financial decisions.

The Human Cost: Real-Life Stories of Financial Illiteracy

Case 1: The Pensioner Who Lost Everything

In 2022, a retired government clerk in Lahore was duped into investing his life savings—Rs. 1.2 million—in a fake “housing scheme” offering 20% returns. The company vanished within a year. He had no legal understanding, no investment literacy, and no fallback plan. Today, he lives with his son, dependent and depressed.

Case 2: The Credit Trap of Karachi’s Middle Class

A survey by Gallup Pakistan in 2023 revealed that 43% of middle-income households in urban centers rely on credit cards to make ends meet by the third week of the month. Most of them don’t understand how interest accrues, leading to spiraling debt. When emergencies hit—like a medical issue—they end up borrowing from informal lenders with exorbitant rates.

The Societal Impact: When Everyone’s Broke, So Is the Nation

Financial illiteracy doesn’t stop at individual losses—it bleeds into the economy. When millions of people overspend, under-save, and rely on informal credit, it leads to:

• Lower national savings rates
• Increased default on loans, weakening the banking system
• Dependency on remittances or subsidies
• Underutilization of financial institutions
• Difficulty in implementing fiscal policies, as people don’t understand inflation, interest rates, or taxation

For example, Pakistan’s national savings rate remains among the lowest in South Asia—just 12.7% of GDP in 2022—partly because people lack the financial tools and habits to save.

Education Gaps: Why Are We Not Taught This?

The glaring truth is: most schools and colleges don’t teach personal finance. Mathematics classes often focus on algebra or geometry, but not on how to calculate interest on loans or set a monthly budget.

In rural areas, the situation is worse. Even literate youth in Sindh or Balochistan often have no access to bank accounts, let alone financial education. In female populations, the gender gap exacerbates the issue—over 60% of women in South Asia have no access to formal financial services.

And yet, as soon as these young people turn 18, they’re expected to make adult financial decisions in a system they don’t understand.

Psychological and Cultural Barriers

In many societies, money is a taboo subject. Families don’t talk about debt, income, or budgeting. Children learn spending habits by observation, not instruction. Cultural pressures to host lavish weddings or buy expensive phones on installment contribute to a “live now, pay later” mentality.

Moreover, emotions drive financial decisions. Stress, peer pressure, and the desire to appear successful lead many into poor financial choices. The impact of social media only worsens this, pushing consumerism without context.

Technology: A Double-Edged Sword

Digital financial tools like Easypaisa, JazzCash, and mobile banking apps are booming. But without literacy, these can either be a blessing or a trap.

✔️ The Good:

• Easier access to savings, transfers, and microloans.
• Financial inclusion for remote populations.
• Women can save or borrow discreetly.

❌ The Risk:

• Misinformation about digital fraud.
• Clickbait investment apps and “crypto scams.”
• Over-reliance on short-term credit via apps without understanding the repayment burden.

One study in 2023 by Karandaaz Pakistan showed that 36% of mobile money users didn’t understand service fees or how interest was charged.

Macro-Micro Link: When Policy Doesn’t Reach the People

When governments make macroeconomic decisions—like raising interest rates to fight inflation—most citizens don’t understand what that means. A financially illiterate population:

• Can’t make sense of fluctuating prices
• Doesn’t plan for inflation
• Votes emotionally, not economically
• Fails to hold politicians accountable for poor fiscal policy

Thus, financial literacy isn’t just personal empowerment—it’s essential for democracy and development.

Bright Spots: Small-Scale Solutions That Work

Despite the gloom, there are success stories.

Village Women’s Banking Circles – Tharparkar

In the Tharparkar district of Sindh, NGOs have trained women in how to pool savings and give interest-free microloans within their communities. This informal banking circle model has improved female empowerment and decreased reliance on moneylenders.

School Programs in India

India’s National Centre for Financial Education (NCFE) runs school programs teaching children about budgeting and savings using cartoons and games. Evaluations show that children who attend these sessions influence their parents’ financial behavior.

Online Platforms

Pakistani YouTubers and financial influencers now reach thousands with simplified videos on personal finance. But these need to be scaled and translated into regional languages for broader impact.

 Solutions and Way Forward

To address financial illiteracy comprehensively, we need multi-tiered strategies:

1. Curriculum Reform

• Integrate personal finance into middle and high school.
• Include practical modules: how to use an ATM, how interest works, how to file taxes.

2. Banking Inclusion

• Ensure every citizen, especially women, has access to formal banking.
• Simplify banking processes and provide visual or audio aids for low-literacy populations.

3. Digital Literacy Campaigns

• Train users before promoting mobile financial apps.
• Use local languages and storytelling to communicate risks and benefits.

4. Community-Based Learning

• Encourage community centers, and NGOs to run monthly finance sessions.
• Partner with media houses to air public interest ads on TV and radio.

5. Government and Private Sector Partnerships

• Central banks and fintechs must work together to promote trust, transparency, and education.
• Tax incentives could be given to companies offering financial education programs.

Financial Literacy is Not a Luxury—It’s a Necessity

We live in a world where one mistake—signing a loan you don’t understand, clicking on a scam investment link, or ignoring the power of saving—can cost you years of hard-earned peace.

Financial literacy is not about wealth—it’s about well-being. It empowers the farmer in Badin, the clerk in Quetta, the teacher in Sukkur, and the housewife in Peshawar to make smarter decisions, resist exploitation, and build futures with dignity.

The real tragedy is not that people are poor. It’s that they are poor and uninformed—trapped not just in scarcity, but in a system that hides the rulebook.

We must change that.

Because when people know better, they do better.

Read: The Body of the River: A Tale of Indus

___________________

Abdullah Soomro, penname Abdullah Usman Morai, hailing from Moro town of Sindh, province of Pakistan, is based in Stockholm Sweden. Currently he is working as Groundwater Engineer in Stockholm Sweden. He did BE (Agriculture) from Sindh Agriculture University Tando Jam and MSc water systems technology from KTH Stockholm Sweden as well as MSc Management from Stockholm University. Beside this he also did masters in journalism and economics from Shah Abdul Latif University Khairpur Mirs, Sindh. He is author of a travelogue book named ‘Musafatoon’. His second book is in process. He writes articles from time to time. A frequent traveler, he also does podcast on YouTube with channel name: VASJE Podcast.