A student has AED 200. Should they spend it, save it, or keep some aside for a future goal? Making that choice requires more than knowing what saving or budgeting means. It requires understanding what each option could mean.
This is where a financial literacy program for youth can help. The latest OECD PISA financial-literacy assessment available for the UAE, conducted in 2022 and published in 2024, found that 39% of participating 15-year-olds did not reach the baseline Level 2 proficiency in financial literacy. Students below Level 2 can, at best, identify common financial products and terms, recognise the difference between needs and wants, and make simple decisions about everyday spending in familiar contexts.
Financial literacy can therefore play an important role in helping young people develop the knowledge and skills needed to make financial decisions as they move towards adulthood.
What Is Financial Literacy, and How Is It Different From Financial Knowledge?
Financial knowledge means understanding basic money concepts, such as budgeting, saving, interest and investment risk. Financial literacy goes further: it involves applying knowledge, skills and attitudes to make effective decisions in real financial situations. This distinction is central to the OECD’s PISA framework.
The distinction is simple:
| Knowing | Applying |
| Knowing what a budget is | Using a budget to decide what you can afford |
| Knowing saving is important | Deciding how much to save and what the goal is |
| Knowing interest affects borrowing | Considering the total cost before taking a loan |
| Knowing investments involve risk | Assessing whether a particular risk is appropriate |
Financial literacy is therefore not just about remembering financial terms. It is about using financial knowledge when comparing options, considering consequences and making choices.
Financial Literacy and Everyday Spending Decisions
Comparing Options Before Spending
Comparing prices is one practical example of financial decision-making.
In the UAE, 75% of students reported that they sometimes or always compare prices in different shops when considering a purchase using their allowance. Students performing at Levels 4 or 5 were more than three times as likely to report comparing prices as students at Level 1 or below.
Looking at different options before spending can help a student understand what they are getting for their money rather than making a decision based on the first option they see.
Understanding Needs and Wants
Knowing the difference between a need and a want is another part of everyday financial decision-making.
In the UAE, 79% of students reported being exposed at school to tasks exploring the difference between spending money on needs and wants.
For a student, this distinction can help when deciding whether something should be purchased now or whether the money should be kept for something more important.
Peer Influence and Spending Decisions
Financial decisions can also be influenced by other people. In the UAE, 67% of students reported having bought something during the previous 12 months because their friends had it.
Students performing at Levels 4 or 5 were 35% less likely than students at Level 1 or below to report buying something because their friends had it.
This highlights another part of financial decision-making: being able to consider whether a purchase reflects a genuine need or want rather than simply responding to outside influence.
A Simple Spending Check
Before spending, students can ask:
- What am I buying?
- Do I need it now?
- What alternatives do I have?
- What will I have left afterwards?
- Does this affect a more important goal?
For broader examples of how these skills work in everyday situations, explore the real-life applications of financial literacy.
Financial Literacy, Saving and Future Decisions
Saving requires a different kind of decision from spending. Instead of focusing only on what can be bought today, a student has to consider what they may want or need later.
In the UAE, 89% of students reported saving money at least once during the previous 12 months. Students performing at Levels 4 or 5 were more than twice as likely as those at Level 1 or below to report saving into an account or at home, after accounting for student characteristics, bank account holding and attitudes towards saving.
Saving as a Financial Decision-Making Skill
A student saving for a laptop, for example, may set aside part of an allowance instead of spending it all. The decision involves considering current spending alongside a future goal.
This can involve:
- Goal-based saving: deciding how much to set aside for a specific purpose.
- Emergency saving: keeping money available for unexpected needs.
- Delayed gratification: choosing to wait for a future benefit instead of spending immediately.
- Long-term planning: considering how today’s financial choices affect future options.
Digital Finance and Financial Decision-Making
Young people are already interacting with financial services and digital purchasing environments.
In the UAE, 86% of students reported buying something online during the 12 months before the PISA 2022 assessment. The same assessment found that 30% held a payment or debit card and 28% held a bank account.
Buying something online was associated with a 39-point increase in financial-literacy performance in the UAE, after accounting for student characteristics and other experiences with money and basic financial products.
These findings show why financial decision-making is relevant to the digital experiences students already encounter.
Making Careful Digital Financial Choices
Before responding to a digital offer or making an online purchase, students can consider:
- Total cost: What will I actually pay?
- Credibility: Is the information or offer trustworthy?
- Risk: What could go wrong?
- Impact: How could this affect another financial goal?
Being able to use a digital financial tool is different from being able to evaluate a financial choice. Financial literacy can help students approach digital financial decisions with greater awareness of costs, risks and consequences.
Financial Confidence and the Limits of Knowledge
Financial knowledge can be useful, but knowing financial concepts does not necessarily mean knowing everything needed to make a particular decision.
A 2025 peer-reviewed study using data from the 2021 U.S. National Financial Capability Study examined overconfidence in financial knowledge. The researchers found that people who overestimated their financial knowledge were associated with lower investment participation, weaker retirement planning, lower emergency saving, poorer risk evaluation and less help-seeking.
The study also found that some overconfident respondents reported greater financial satisfaction despite weaker objective financial outcomes.
Key takeaway: Financial confidence is not the same as financial competence.
The study focused on U.S. adults, so it provides broader context rather than UAE-specific evidence. The finding highlights why recognising the limits of your financial knowledge matters when making decisions.
Before making a financial decision, students can ask:
- What do I know?
- What don’t I know?
- What information do I need?
Financial Skills That Support Better Decision-Making
Financial literacy involves several abilities working together:
| Financial skill | Decision it helps answer |
| Budgeting | How much can I reasonably spend? |
| Comparison | Which option offers better value? |
| Saving | What should I prioritise for the future? |
| Numeracy | What do the actual costs and percentages mean? |
| Risk assessment | What could I lose or what could go wrong? |
| Critical thinking | Is this financial information reliable? |
| Self-awareness | Do I understand this decision well enough? |
These skills can work together when a student faces a financial choice. Knowing how to calculate interest, for example, is useful, but understanding how that interest affects the total cost can make the information more meaningful when considering borrowing.
Better financial decisions involve more than calculation. They also require comparison, awareness of potential risks and consideration of personal priorities.
Practising Financial Decision-Making Before Adulthood
Students can build decision-making skills by working through situations that reflect the kinds of choices they may encounter in everyday life.
A financial literacy program for youth can provide opportunities to practise through:
- Realistic scenarios: Give students a fixed amount and competing needs, then ask them to allocate it.
- Comparison exercises: Present similar products and ask which offers better value and why.
- Savings goals: Show how changing current spending affects the time needed to reach a target.
- Simulations: Introduce unexpected expenses or changing priorities and let students adjust their choices.
Decision reflection: Ask, “What made you choose this option?”
The purpose is not to give students one fixed answer for every financial situation. It is to give them opportunities to evaluate choices, explain their reasoning and consider possible consequences.
What Should Students Look For in a Financial Literacy Course?
Financial education can be more useful when students have opportunities to work with concepts rather than simply memorise financial terms.
Look for:
- Age-appropriate content
- Practical financial scenarios
- Budgeting and saving exercises
- Risk awareness
- Digital financial awareness
- Opportunities to apply concepts
- Reflection on decisions
A worthwhile programme should help students practise judgement, not simply remember financial definitions.
How Does Trusity Help Students Build Financial Literacy?
Trusity offers financial literacy learning for students aged 8–18 through its Wealth Wise programme. The programme covers earning and saving, spending and budgeting, credit and debt, investing and financial decision-making, with interactive activities, real-life simulations and collaborative learning. For families looking for online classes for kids in Dubai, Trusity provides a structured learning environment where students can develop practical skills alongside their academic learning.
Its financial decision-making activities ask learners to consider costs, benefits, consequences and alternatives when making choices.
The value of financial education lies not only in what students know, but in how thoughtfully they can apply that knowledge to decisions.
Frequently Asked Questions
How does financial literacy influence decision-making?
Financial literacy gives students knowledge and skills they can use when comparing options, considering costs and risks, and thinking about how a financial choice may affect future goals.
Why is financial literacy important for students?
Students already encounter financial decisions involving spending, saving, allowances, online purchases and peer influence before adulthood. Building financial literacy can give them a stronger foundation for navigating these choices.
Does financial literacy guarantee better financial decisions?
No. Financial decisions can depend on the information available, the circumstances surrounding a choice and how confidently a person understands the situation.
How should young people learn financial literacy?
Young people can learn through age-appropriate financial concepts alongside opportunities to work through practical scenarios, comparisons, savings goals, simulations and decision-making exercises.
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