Financial Literacy

Introduction

Financial literacy involves a basic understanding and knowledge with regards to making money decisions. These decisions could be long-term or short-term and require skills and knowhow to guide us through the process of making such decisions. Making informed decisions about money is more critical in the 21st century than ever before with the existence of technology and social media.

Source

There are several channels and sources of financial literacy available today, however knowing which source is legitimate and trustworthy requires asking relevant questions and seeking answers to them. The decisions we make about money, whether long-term or short-term, have ramifications that may change our lives forever. For instance, deciding on what loan to go for when buying a house, will have a long term effect on our finances for better or for worse.

Lifelong Learning

Financial literacy is therefore a lifelong experience and not an event. Reading and researching on topics, listening to podcasts on relevant topics, attending conferences or taking a class may all enrich our skills and knowledge in financial literacy.

Personal Finance Vs Financial Literacy

Translating financial literacy into life choices and decisions introduces the concept of personal finance. Personal finance includes how you invest, save, and spend the money you earn. Being able to make informed decisions about your money makes a lot of difference in the future. Ultimately, having the relevant skill set and understanding how money works influences our choices and the life we live.

Topics in Personal Finance

The following topics are relevant when it comes to money and personal finance:
  • Investment
  • Budgeting
  • Saving
  • Credit Management
  • Insurance
  • Mortgages
  • Retirement
  • Taxes

Conclusion

Finally, living within your means is the hallmark of any successful personal finance initiative and lifestyle. Living beyond what you earn means you have to find a way to finance the shortage which is usually through borrowing. Borrowing is a necessary part of our life, however we need to borrow to finance projects and items that are relevant to our lives and future. For instance, borrowing to buy a house will be a good decision as the house has the potential of increasing in value and creating wealth for us in the future. Increasing our financial literacy will therefore go a long way to improve our future. Saving is the answer to avoid unwarranted borrowing.