What is Financial Literacy?
It is simply having a basic understanding of your finances. Having basic financial knowledge helps you make informed choices and be competent.
It is important to understand financial basics to have a grip on the value of money.
It is excellent to be aware of tedious financial terms, but applying that knowledge effectively will lead to financial stability in life. In layman terms, financial literacy is having an understanding of the core areas like:
- Paying bills on time
- Regular savings
- Debt management
- Periodic investments
Majority of educational institutions do not include financial education as a part of their curriculum. Hence, if parents lack financial education, children have no other source to gain financial knowledge.
That being said, following are some ways to help you become financially literate:
The traditional way for gaining any knowledge is to read books. Get started with personal finance books to get an insight into financial management.
It is essential to dedicate a substantial time to your book reading. These books will help you understand the concept of budgeting, money, investing and many other financial basics.
Newspapers are other useful resources to read. The financial section of a newspaper is an authentic source to augment your financial knowledge.
- Magazines and Online Publications
Apart from books and newspapers, online publications and financial magazines can be equally important contributors to your financial education.
These days, there are umpteen financial bloggers that you can follow. Also, there are financial websites having loads of information and online calculators.
- Financial Management Tools
Do not let your financial management become boring and monotonous. Living in a digital world, there is an abundance of financial tools to make you an expert. These financial tools will help you learn a lot too.
- Money Podcasts
Not everyone can dedicate time to reading because of their work schedules or other commitments. It can be challenging and time-consuming at the same time.
In this case, podcasts can be the perfect option. There are many good podcasts available online that you can listen to while working or travelling to/ from work.
These podcasts contain vital information and vary in their length from 10 minutes to one hour. It is beneficial to dedicate your time to these as they are free of cost and easily available.
- Financial Literacy Course
Apart from going the technical way, you can get yourself enrolled in a financial course or a class. There are many options, such as College course, online course, and education centres.
These courses will provide a structured platform to learn. As per research, these courses prove to be great methods of imparting knowledge.
- Basic math skills
To be a financial expert, you need to have a stronghold on your mathematics. Since managing your finances requires calculations, you need to acquire necessary mathematics skills.
You should work on your math skills to apply basic formulas to organize, save and budget your finances.
With technology plating, a crucial role in today’s lives, excel sheets can act as a saviour for you for tedious calculations. But for more straightforward calculations and every budgeting, math skills are a must.
Benefits of Financial Literacy
By now, you must be starting to understand the power of financial literacy. Being a financial literate has long term benefits impacting our present and future both. Here are some points to convince you to become a financial literate:
- Gaining control
Do not let money control you. Instead, take control of your personal finances. Having control of your finances makes you feel confident and empower you financially. Additionally, it helps you in decision making for your finances.
- Eliminating debt
Debt management is one of the aspects that financial literacy caters to. These days, many people spend to impress. With a low income, many people tend to borrow loans fulfil their luxuries.
Therefore, debt has become a way of life for the younger generations. Financial education makes you understand the importance of being debt-free and how debt works.
It teaches you how to avoid debt disasters and the interest rates attached to it. Being a financial literate helps you save and manage your debts.
- Identifying fraud
This point may be the less talked reason but plays a crucial role. Substantial financial knowledge can help you identify any fraud or theft in your financial space.
You can catch red flags in your investment, banking and savings schemes. It also helps you evaluate your financial options and make an informed decision.
WHY- Financial literacy
Many people are unable to manage their finances and ultimately tend to borrow loans to fulfil their demands. Many financial institutions and direct lenders offer unsecured personal loans for such purposes.
Another facility by these lenders is unsecured loans for bad credit history people. Loans are often considered a burden and should be avoided whenever possible.
Financial literacy lets you manage your finances in a way that will help you avoid borrowing loans. In case of a borrowed loan, it will help you to manage your interest rate and other costs related to your loans.
Financial education is an essential component of life and should be acquired by everybody from schoolchildren to working professionals to home makers for the smooth functioning of their lives.