Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.13, 2015 92 Financial Literacy and Management of Personal Finance: A Review of Recent Literatures Matewos Kebede (Ph.D. Candidate) Department of Commerce, Punjabi University Patiala, India Dr. Navkihiran jit Dalhual Kaur (Head, Associate Professor) Department of Commerce, Punjabi University Patiala, India Dr. Jasmeendeep Kuar (Associate Professor) Department of Commerce, Punjabi University Patiala, India Abstract The objective of this paper is to present a review and synthesis of recent studies on financial literacy and related issues. Starting with review of prior literature surveys, the current study advances personal finance literature by presenting recent studies on financial literacy, the link between financial literacy and financial management behavior, and financial inclusion. And showed that people, even in developed world, lacks basic knowledge, skill and attitude for optimal personal financial management decisions. As a result enhancing financial literacy and personal finance education becomes relevant policy in developed and high income countries since the mid- 1900s. A recent academic and policy interest in developing countries, albeit large scale surveys are lacking, show increasing global relevance financial literacy and savvy financial behavior for socio economic health of a nation. Recent studies from emerging and developing countries confirmed low level of financial literacy and it’s correlation with being female, young or old, unemployed, having low educational attainment, low income, and living in rural area however few studies found some demographic variables insignificant. These studies suggested furthering of financial education to different cohorts of population, especially targeting those with low financial literacy level. Nevertheless, empirical evidences on the impact of financial literacy on financial behavior, and financial inclusion remained mixed, but suggesting positive outcomes of well-designed and targeted financial education, sometimes coupled with other interventions. Keywords: Financial literacy, financial behavior, financial inclusion, literatures review. 1. Introduction This study presents the review and synthesis of recent studies on financial literacy and its relationship between personal financial management, financial inclusion. Further, this paper includes the link between personal financial management the ultimate outcomes. Increasing number of studies from finance, economics and publicly funded financial literacy and financial capability surveys showed that most people lacks basic knowledge, skill and attitude required in effecting personal financial management tasks (IPAS, 2012, Xu & Zia, 2012). As a result enhancing financial literacy of people through financial education becomes relevant policy in developed and high income countries (Choli, nd; Frade & Lopes, 2005; Holzman, 2010). This growing academic and policy interest is not only because people lack basics of personal finance, but the repercussions of failure to optimally manage personal finance have been negatively affecting individuals and entire of economy of a nation. Some authors cited the causes of 2007 financial crises and the challenges that household and economies faced provided a teachable moment (Choli, nd; Donnell & Keeney, 2010; Santos & Abreu, 2013). Moreover, factors like surging cost of living, increasing sophistications of financial market and proliferations of financial products, the rise of open credit society, pension system reforms which all demand individuals to be more responsible in personal finance. Thus positive micro and macroeconomic outcomes of financial education policies underpin financial education policies implemented in many developed countries. But empirical evidences on the outcomes of financial education initiatives remained inconclusive (ROA Garcia, 2011; Xu &Zia, 2012). Recently the need to design and implement financial literacy enhancement policies have also been recognized in developing and low income countries (Xu & Zia, 2012) as part of financial inclusion (OECD, 2013), other poverty reduction programs and to build a vibrant financial market (Kummar & Annes, 2013) for the fact survey results in this countries, though few, showed how low financial literacy affect personal finance decisions at individual and household level. Further failures to achieve financial inclusion objectives in most developing countries attributed to lack financial literacy (Chiba, 2009). The center for financial Inclusion (2013) also proposed integration of financial capability as one of the pillars in financial inclusion policy and programs in order to ensure a full financial inclusion. The OECD also recommended scaling up the role of financial education to financial inclusion both two developed and less developed countries since the year 2010 (OECD, 2013). Research results supporting the recommendation have also been emerging. For example: Ananths (2011) identified financial illiteracy among factors contributed to microfinance crises in Andhra Pradesh, India, suggesting increasing access to credit for those with low financial literacy could be counterproductive. A recent