Why Financial Literacy Matters?

Disclaimer: The nature of your current role or income doesn’t matter. You just need a curious mind and interest to learn finance. Age and experience never are and never will be the metric.        

Though it varies among countries, surveys indicate that 1 in every 3 individuals is a financially illiterate. Another shocking finding is that mostly women, low-income and lower-educated people are in the gaps.

But is being financially literate crucial? Our ancestors just had basic knowledge and used math mostly. You may think that basic knowledge was enough in the 15th century but times have changed. Just like technological development and lifestyle changes, the finance industry has also undergone many changes.

Just like every other industry, finance is an ocean. From whales to pond fishes the industry is filled with knowledgeable people. But the problem here is that many people are not even aware of the basic financial terms and lack the basic knowledge.

It doesn’t matter where you are at, financially. There are stories of people who learned money management and transformed their lives 360°. You just have to start.

The Basics

There are 1000s of financial terms but these are the most basic ones that every person should know to live financially stress-free.

The money you earn:

Income is basically what you earn. All you have to be aware of is the breakdown of your income and how much money you will be getting every month. Though it makes us understand other terms like paychecks, taxes and benefits, it gives us an idea to increase our earning potential.

The money you spend:

You can’t and shouldn’t spend your money without a plan and that plan is budgeting. It is a plan to use the money for the things that you want and value. Before you spend on the things that help you keep up with the trending lifestyle, think whether it aligns with your goals and values.

Money for the future:

Saving helps secure your future. When you put away some money from your income, you always have the freedom to build your dream future. You need a proper saving and investment plan that helps your money grow. The most important part is consistency.

Borrowed money:

You have to understand the term ‘Credit’ to avoid financial pitfalls. Many people borrow money without a plan on how to repay them and fall deep into debt. It’s crucial to be mindful of all your borrowings and you have to pay extra cash as interest in return.

Money for unexpected events:

You never know when you face emergencies and risks. Those unexpected events may create a financial strain in your future. Instead of worrying about money, you can plan ahead and save at least 3-6 months' worth of funds for emergencies.

There are many reasons why you should possess financial literacy (that’s for another day). The most important ones are financial stability and lower financial problems.

When you deep dive, a whole new path opens and these 5 terms are just the beginning.

As Warren Buffet said, “The best investment you can make, is an investment in yourself... The more you learn, the more you’ll earn.”

By investing in financial literacy, you are not just improving your life, you are also inspiring people around you to do the same.

You can have control over your future and build a secure future. Always keep an eye on your finances and watch your life improve.