Financial literacy is having an adequate level of knowledge about personal finance (such as saving, budgeting, credit management, investing, taxes, insurance and more) so that you can make informed and effective decisions with your money.
Being financially literate means that you have a grasp of the fundamentals of smart spending and saving decisions and that you know where to turn when you need some assistance. At the very least, financial literacy involves tracking your spending to know where your money is going. That’s the starting point for staying out of debt, paying down debt, saving and investing.
5 reasons why financial literacy matters:
- Get better sleep – Getting a good night’s sleep is critical to your wellness, but money can get in the way. Bankrate’s survey findings revealed that more than 30 percent of Americans are staying awake, worrying about everyday expenses. Financial literacy helps you lay those concerns to rest — literally.
- Feel more prepared – If you’ve been stressing about everyday costs, what will you do when an unexpected expense arises? An introduction to financial literacy teaches you the importance of having an emergency savings fund to take care of curveballs like a major car repair, a medical bill or a job loss.
- See yourself through the eyes of a potential lender – Being financially literate isn’t just about your own knowledge; it’s also about understanding how banks might assess your financial skills. With a grasp on the importance of your credit score, you can have a good idea of where you stand when applying for a mortgage or a car loan. Consider financial literacy as a pathway to empower yourself with a better estimate of the type of terms a lender should offer you.
- Spot a bad deal when you see one – All those preapproved offers for credit cards and personal loans that arrive in the mail or land in your inbox may sound appealing, but they’re likely worth shredding or deleting. Being financially literate gives you the ability to scan those terms and immediately recognize warning signs.
- Work less – Learning the basics of finance early means enjoying your time later. If you can see how the value of compounding interest will accelerate the growth of your retirement fund, perhaps you can move your retirement date a bit earlier on the calendar.
3 Tips to fuel your financial literacy:
- Take advantage of free learning opportunities: If you’re just beginning on the road to financial literacy, there is an increasing number of resources that can take you a long way on your journey — and they won’t take a penny away from your own finances.
- Evolve your education: There are different pillars of financial literacy at different stages of life. Your need for knowledge will evolve over time as your needs and goals change. Financial literacy begins with the basics of budgeting, credit building and saving, but as you mature, it will expand to include investing, insurance, taxes and estate planning. As you approach bigger life decisions – buying your first home, having children or determining what to do with an inheritance, for example — continue to educate yourself on the implications of different choices you are considering.
- Trust someone else, but always stay in the driver’s seat: Never fully abdicate the responsibility for your finances. While it’s OK if your partner or investment manager handles the nuances of managing the money, you still need to have a supervisory role with knowledge of what’s happenin
Finally, if you have kids, make personal finances part of their learning routine, too. With the school year starting, now is a perfect time for some financial education. Talk about the basics of a budget, the basics of investing and saving, and the dangers of credit cards. It’s never too early to put financial literacy on the at-home curriculum
If you are struggling with bills you can’t pay and need a fresh start, contact us for a free consultation. Every client who files for bankruptcy with us is enrolled in a credit rehabilitation program to increase their credit score for future success. Call us at 732-333-0681