Why Financial Literacy Is So Important
June 07, 2021
Most people associate being financially stable with being mega rich. This couldn’t be further from the truth, as you don’t need to drive a Range Rover and own a house in the best neighborhood in town to be financially stable. You do, however, need to have patience, time and an education. We’re going to focus on the last of those traits in this article as we explore the benefits of financial literacy and why it’s so important.
Understanding Credit & Debt Management
Your credit score follows you through life like a needy puppy that always needs attention. It needs to be looked after constantly. Depending on your score and credit history, it can haunt you or help you so it’s important to educate yourself on the difference between the different kinds of debt. Understand the differences between good and bad debt and why each type of lending falls into a particular category. For example, a home equity line of credit is issued quickly with flexible terms but do you know the pros and cons this type of lending? What category does it fall into? Do you know how mortgages work and what the interest rates are? If not, it’s best you take the time and effort to find out.
Effective Budgeting
Every adult should know how to budget effectively. Ignore this concept and you’ll never be able to stay on top of your finances. The basis of budgeting involves planning how your income is spent. It covers fixed (rent/mortgage/loan repayments), variable (groceries, electricity, entertainment) and periodic expenses (car maintenance, birthdays). Effective budgeting will keep you accountable and help you minimize overspending on unnecessary items that you don’t need.
Sound Investing
Successful investors make their money work for them. To join them, you must understand investing and the risk it involves. Whether you’re interested in the stock market, real estate, or crypto, find your market and learn everything there is to know. Diversifying your portfolio is also important so take some time to talk to successful investors about what that means and what strategies are most suitable based on your circumstances.
Saving
Do you dream of traveling overseas with your family? Or are you more interested in building your dream home on a prime plot of land in your hometown? Maybe you just want a new car sitting in the driveway? All of these things will only be possible if you have savings. Our top tip is to start saving early so that you can build a nest egg that will give you a good financial cushion when it comes to achieving your goals.
Secure Future Generations
This point is especially important if you have children. Being financially literate does not just bring personal benefits, as it helps to educate and inspire future generations to understand the value of money. Pass on everything you’re learning to your children and they’ll be better able to manage their own money and avoid running into debt. You’ll teach them respect and discipline, the benefits of which will spread much further than dealing with finances. Put the effort in now and they’ll thank you for it later.
