CHAPTER 1: INTRODUCTION

1. Background of the study
Current economic conditions have raised serious concerns about financial security, especially the managers and individual who lack the skills and resources to withstand financial market downswings and take advantage of upswings. Individuals and managers are taking responsibility for a growing number of financial decisions, the two most important arguably being the purchase and financing of their day-to-day financial activities.
In recent years, financial literacy has gained the attention of a wide range of major banking companies, government agencies, grass-roots consumer and community interest groups, and other organizations. Interested groups, including policymakers, are concerned that consumers lack a working knowledge of financial concepts and do not have the tools they need to make decisions most advantageous to their economic well-being. Such financial literacy deficiencies can affect an individual’s or family’s day-to-day money management and ability to save for long-term goals such as buying a home, seeking higher education, or financing retirement. Ineffective money management can also result in behaviors that make consumers vulnerable to severe financial crises. From a broader perspective, market operations and competitive forces are compromised when consumers do not have the skills to manage their finances effectively. Informed participants help create a more competitive, more efficient market. As knowledgeable consumers demand products that meet their short- and long-term financial needs, providers compete to create products having the characteristics that best respond to those demands.
However, other researchers argue that financial literacy is a secondary concern when it comes to decision making, partly because evidence on financial education programs has been mixed. Early evaluations, notably by Douglas Bernheim and a series of coauthors, suggested that workplace financial education initiatives increased participation in savings plans (Bayer et al., 1996; Bernheim 2003), while financial education mandates in high school significantly increased adult propensity to save (Bernheim et al., 2001).
A large part of this debate may be linked to the fact that a great deal of variation continues to exist in how researchers define and measure financial literacy itself. Previous surveys that are purposively designed to measure financial literacy (such as the Washington Financial Literacy Survey, the Jump$tart Coalition Survey, or the Survey of Consumer Finances 2001 module) rarely also collect sufficiently detailed information on individuals’ financial education and variables related to financial decision making.
This research will exposed a lot of importance issues encompassed to the effect of the financial literacy and the manager’s performance. The reader will be knowledgeable about the impact of financial knowledge on decision making, those with the experienced makes relevant decision compare to those without having the financial literacy knowledge. The research exposed and highlighted different views from the scholars about the benefit and the essential reasons for the managers and individual most learn about financial literacy for their future life.

1.1. Problem Statement
The main purpose that individuals and managers do not engage in planning for the varies capital management for the purpose of right decision making that will impact increment of their resources possess or are not knowledgeable about the terms of financial institutionalization is that they lack financial literacy. Bernheim (1995, 1998) was one of the first to emphasize that most individuals lack basic financial knowledge and numeracy. Several surveys covering the U.S. population or specific sub-groups have consistently documented very low levels of economic and financial literacy. The National Council of Economic Education (NCEE) periodically surveys high school students and working age adults to measure financial and economic knowledge. The survey consists of a 24-item questionnaire on topics including “Economics and the Consumer,” “Money, Interest Rates and Inflation,” and “Personal Finance.” When results were tallied using standard grading criteria in 2005, adults had an average score of C, while the high school population fared even worse, with most earning an F. These findings are confirmed by the Jump$tart Coalition for Personal Financial Literacy survey, which also documents very low levels of basic literacy among U.S. high school students (Mandell, 2004). Hilgert, Hogarth and Beverly (2003) examine data from the 2001 Survey of Consumers, where some 1,000 respondents (ages 18–98) were given a 28 question true/false financial literacy quiz, covering knowledge about credit, saving patterns, mortgages, and general financial management. Again, most respondents earned a failing score on these questions, documenting widespread illiteracy among the whole population. Similar findings are reported in smaller samples or among specific groups of the population (Agnew and Szykman, 2005, and Moore, 2003). Lusardi and Mitchell (2006) devised a special module on financial literacy for the 2004 HRS.8 Adding these types of questions to a large U.S. survey is important not only because it allows researchers to evaluate levels of financial knowledge but also and, most importantly, because it makes it possible to link financial literacy to a very rich set of information about household saving behavior. The module measures basic financial knowledge related to the workings of interest rates, the effects of inflation, and the concept of risk diversification. 9 Findings from this module reveal an alarmingly low level of financial literacy among older individuals in the United States (50 and older). Only 50% of respondents in the sample were able to correctly answer two simple questions about interest rates and inflation, and only one-third of respondents were able to answer correctly these two questions and a question about risk diversification.
However, some individuals and managers are facing problems with the financial management due to the fact that lack of financial literacy contributed. In normal cases we all make decision to our day-today capital with the aim of getting positive result or loyal satisfaction, but the result will be totally difference compare to the manager or individual that are financial literacy with those that lack the experience. Those with financial literacy are expected to make relevant decision and end of with positive result. A lot of business had been failed so far due to the improper lack of financial skills that will enable and enhance their capacity of making proper decision.
This problem may seem to be normal without putting more attention or consideration to deal with such issues, but when we dig deep into the root of the matter we experience that it is absolutely hard to handle. This is because neither individual nor managers would like to expose their capital to excessive financial risks without taking serious action to protect any confronting uncertainty. Moreover, building confidence in the hearts of the individual and managers creating conducive atmosphere for the safety of their funds and to constitute effective financial decision making an important milestone in this regard.
Therefore, in order to secure the confidence of the individual and managers, we take the entire issues of financial literacy necessary. Thus, it is highly imperative to have the attention of these individual and managers by presenting the significance and impact of financial literacy in their life. This could be achieved by drawing their attention to the huge benefits to be cultivated and reaped if they patronize such knowledge, because the world has now been taking field related to financial issues very important most especially in United States of America, is one of the best professional skills in there.
Consequently, this research projects the overwhelming the financial skills and managers performance.It is known that every single individual or managers yearns to maximize profit and reduce risk which both could be achieved under the financial literacy.
It is expected that the individual and managers will have a positive views of financial literacy, but it require convincing and some modification in the financial information of some financial institution.

1.2. Research Objectives
The general objective of this project paper is to investigate the impact of financial literacy and manager’s performance on individual and managers. The specific objectives are:
1. To expose the important of financial literacy to both individual and managers.
2. Highlight the factors that will make the individual and mangers to be financial literate.
3. Disclose the reason indicate why financial literacy matters to individual and managers for effective decision making.
4. To assess the important point that makes financial literacy plays significant role in manager’s performance.

1.3. Research questions
The research will address the following specific questions:

1. Why is financial knowledge important?
2. What are the factors that will make the individual and mangers to be financial literate?
3. Why does financial literacy matters to individual and mangers for effective decision making?
4. Does financial literacy play significant role in manager’s performance?