Financial literacy is more than just being able to know when to spend and on what. It is a concept that defines one’s life, a very crucial concept that can improve your everyday life if done well. A greater percentage of the world’s population doesn’t know what financial literacy is or why they should have it. On the other hand, those who know what it is, are not sure why being financially literate is so important.
Being financially literate helps you make informed decisions when it comes to your finances. For instance, you know whether to trade digital currencies or whether investing in stocks is the better option for you. Essentially, being financially literate through financial literacy programs help you save for the rainy day and avoid costly mistakes. If you’re curious about how financial literacy can help you live a better life, keep reading.
First and Foremost: What Is Financial Literacy?
Before we discuss in detail how financial literacy, like knowing how to buy Dogecoin, can help you live a better life, let’s understand this concept. Financial literacy refers to the ability to grasp and efficiently use various financial skills such as budgeting and investing.
In simple terms, financial literacy refers to the ability to manage one’s personal finances and avoid costly financial mistakes. Financial literacy is not something you learn at once; it is lifetime learning and requires a conscious, deliberate effort.
The need to be financially literate cannot be overemphasized, given how important finance is in modern society. To put it bluntly, lacking financial literacy poses a threat to one’s financial life and can damage one’s long-term financial success.
Unfortunately, according to research, the percentage of financial illiteracy in the world trumps that of financial literacy. For instance, the Financial Industry Regulation Authority (FINRA) attributed financial illiteracy to 66% of Americans.
The good news is that you can go from financial illiteracy to financial literacy in days if you put in the work. There are now resources available at your fingertips for those who want to educate themselves about the finance world. These resources include the government-sponsored Financial Literacy and Education Commission where you can get several courses for free. Financial literacy can ultimately protect you from becoming a victim of financial fraud, which has become commonplace in society today.
Why Does Financially Literacy Matter So Much?
Lacking financial literacy skills can result in various pitfalls, including accumulating more debts than one can afford to have. This can be caused by either a lack of long-term preparation or unpalatable spending decisions.
Consequently, an individual lacking financial literacy may find themselves facing bankruptcy, poor credit, and housing foreclosure, among other things. Financial literacy helps you avoid these pitfalls because you are equipped with the knowledge that helps you manage your finances wisely.
Financial literacy is vital to managing factors ranging from daily expenses to long-term budget forecasting. If you’re working, saving toward retirement is the wise thing to do to ensure you are not stranded. However, financial literacy goes beyond just saving; it also involves avoiding high levels of debt that can result in hardships. Unfortunately, reports show that more than one-fourth of Americans don’t have retirement savings; less than 40% are confident in their retirement decisions.
More so, the low rate of financial literacy has left Millennials unprepared for a serious financial crisis. More so, even those who know something about financial literacy cannot explain fundamental financial concepts accurately.
Unfortunately, this set of individuals carries huge amounts of mortgage debt and student loans more than they can possibly bear. While these may seem like personal problems, they inadvertently affect the entire population more than we think.
Financial literacy is crucial not just because it helps one make informed decisions, but because of increasing financial responsibilities. Once upon a time, employers managed employees’ retirement accounts; today, each employee assumes more responsibility through self-directed retirement accounts. Additionally, consumers now have more choices, thanks to the broadened scope of financial products and more widely accessible credit.
How Can Being Financial Literacy Improve Your Life?
There is a lot one stands to gain from being financially literate, and this is more than simply knowing how to balance a checkbook. Managing your cash flow and generally planning for your financial future seems like hard work until you become financially literate. If you’re an investor in the cryptocurrency market, for instance, financial literacy is one thing you want to learn. For one, it helps you know what to invest in and what to avoid, and it protects you from fraud.
Below are some of the top benefits of having financial literacy skills:
You Understand the Relevance of Money
Financial literacy informs you on what money can and cannot buy; it helps you understand the relevance of money. Also, you learn to differentiate between good and unhealthy spending habits, their outcomes, and how to control your expenses.
To put it more bluntly, financial literacy makes you financially smarter; you learn the best ways to invest money. Financial literacy plays an important role in empowering individuals with the knowledge they need to make smarter, future-impacting decisions.
When you are financially literate, you will be smarter in your financial choices. You will understand debts, manageable and unmanageable, and you will know what to do before making financial decisions.
It Makes You More Independent
Financial literacy instills a level of confidence in you that makes you independent. As a student, for instance, you can plan for college and make sound decisions concerning financing options like student loans. By understanding the basics of finances, you will be able to set clearer and more meaningful long-term goals. Financial literacy skills give you a good understanding of budgeting and its importance to your future.
It Prepares You for the Future
Financial literacy equips you with the know-how, confidence, and skills you need to build a secure future for yourself. Even if all you have are basic financial literacy skills, they are enough to make you self-sufficient and give you financial stability. More so, basic financial literacy skills help you understand the importance of managing your personal finances.
Financial literacy is another core skill, alongside critical thinking and creativity, needed to thrive in society – education or business. Thus, whether you are a student or are approaching retirement, you need these skills to be able to make informed financial decisions. These include knowing how to make a personal budget and differentiate between wants and needs. If you’re a student, financial literacy helps you plan for college and the likely expenses.
It Ups Your Living Standard
Financial illiterates are always thinking about how to spend an extra dollar or two, ruminating on what to buy. However, financial literates know how to optimize their finances, and these are those with better chances of succeeding in life.
By making good decisions early in life, financial literates can better handle their finances; they have stronger backbones in financial crises. When a retiree has learned financial literacy early in life, he or she can afford to spend more when retired.
It Gives You Peace of Mind
There are some things that money cannot buy, and peace of mind is one of them. That may sound cliché to you when you don’t have debts running into thousands of dollars hanging over your head. Financial literates calculate their expenses and make the most of them in order to live a better, debt-free life. They live within their means, thanks to a well-constructed budget; thus, they never have to worry about excessive bills.
You Are Free to Dream Big
As a student, having financial literacy skills is everything; it helps you live a better college life. When you do get a job, you will be able to picture how much you’ll be earning when you turn a certain age. As such, there is an assurance within you and the freedom to dream big and aim for more.
When you understand the basics of financial planning, you will become aware of the many possibilities the future brings. Then, you will work hard and plan on your future aspirations, with financial literacy skills making you more ready than ever.
Conclusion
Financial literacy teaches you how to manage personal finances, prepare a budget, and, overall, make smart decisions with money. Essentially, financial literacy skills equip individuals with the ability to make smarter decisions and be more responsible for their finances. An improvement in financial literacy will undoubtedly impact you and your ability to provide for your future. While becoming financially literate is not a walk in the park, it can improve your lifestyle tremendously when mastered.
