Financial Literacy, in simple terms, is the ability to understand the workings of money, how it is made, managed, invested, and how it can be used for both selfish or charitable purposes.
Having in-depth financial Literacy can help you manage or make money, even while sleeping through profitable ventures that may not require your input, such as the stock and money market. To improve your understanding, you must get acquainted with financial literacy principles such as; budgeting, annulations, financial goals, contracts, and employment models.
It is not enough to understand basic concepts. Individuals who want to make investments should actively seek out financial information before making financial decisions. It is not very uncommon to see people mishandling their credit cards, failing to plan for retirement, or making the most of investment opportunities available to them. Lack of information can also lead you to take financial risks which are not worth it. The financial illiteracy of the population can be seen in the rate of debt problems.
Financial education is beneficial for everyone. For young adults, it can help them make more informed decisions regarding equipping them with budgeting tools and saving options. It is essential for families so that they can sustain their homes and pay for education and health. Financial Literacy is also essential for people to plan for their future in terms of retirement and pension funds. Financial education can also be helpful to avoid high-cost charges by non-financial institutions. Financial Literacy enables people to achieve a sustainable and ethical lifestyle. The following can be considered the pillars of financial Literacy:
Budgeting: To enjoy a more relaxed life, it is essential to create a budget and to be able to stay on top of your financial game. By being aware of your spending patterns, you can then better plan your spending.
Saving – your financial health is dependent on your savings, and to be able to enjoy life and pursue your goals, you should always have some financial cushion to fall back on if things don’t work out.
Investing – to achieve your financial goals, you must learn how to utilize your resources more effectively. And to do that, you must be aware of the different investment options, their inherent risks, and the importance of diversification.
Debt Management: Your credit score talks about your financial reliability. And managing your debt is crucial for establishing a good credit score. And it is equally essential to establish your routine and pay your bills on time.