What is Financial Literacy?
Financial literacy is the knowledge and understanding of financial products and money that individuals can apply to a variety financial decisions in order to make more informed decisions about how exactly to handle their personal finances. Ultimately, the purpose of financial literacy is provide individuals with the knowledge of financial principles needed to make a well-informed financial decision and to utilize financial products that positively impact one’s financial well-being.
Many individual countries understand the necessity and importance of their citizens understanding financial literacy and created various task forces to examine their populations with the intention of providing financial literacy outreach and education. A common environment to see financial education literacy is in high schools, where students can be offered the chance to attend some brief courses that can prepare them to properly manage their finances after completing school.
Financial literacy includes a variety of different areas of understanding. Becoming educated about money and exactly how it works is a vital aspect, as is having a good understanding of financial products such as loans, insurance, or credit. It is also important to understand other financial or money issues, such as credit issues, going into debt, paying off debt, tracking money, budgeting, avoiding banking fees, getting lower interest rates, buying insurance, planning for retirement and so on.
Financial literacy aims to discuss a few key topics that can help secure financial security throughout a lifetime.
• Understand key financial products that one may need throughout a life, such bank accounts, retirement savings plans, mortgages and fundamental investments such as mutual funds, bonds, and stocks.
• Understand basic financial concepts such as investment return, risk, compound interest, diversification, etc.
• Discuss financial and money issues that are usually left unspoken
• Make good financial decisions about spending, saving, and managing debt during key moments such as receiving an education, getting a new a job, purchasing a house, beginning a family, or preparing for retirement
• Accommodate to changes that affect financial well-being in a prepared and competent matter such as changes in the general economy like rising unemployment, collapsing financial markets, or threat rapid inflation
How to Improve Your Financial Literacy
While it is impossible to suddenly become extremely financially literate overnight, it is important to be patient and continue educating yourself on financial literacy. Resources such as books, newspapers, and magazines can be used to gain more information about money and finance. But just reading alone is not enough to drastically improve your financial literacy. It is important to make changes, to your financial lifestyle. Trying to live more frugally, planning a budget, saving for emergencies, carefully taking out loans, or knowing your credit score are some small ways to be more financially literate.
There are also man differential financial planning and investing classes offered locally which are designed to improve your financial literacy. If a class is not possible, a good alternative is to simply ask someone questions if they are very financially literate. This can be done in person, or through various online means, such as online forms or discussions.