Financial literacy helps you expand your knowledge on how to spend money wisely. Furthermore, you’ll know how to save and avoid impulse buying tendencies. Majorities of people are running into endless debts, not because they don’t earn well; instead, it’s because of not using the right channels to ensure money received stays longer.
Presently, a large number of the American population is not financially educated. According to a survey carried out by CFSI, out of 5,000 people, only 28% had basic knowledge on how to manage their finances. Below, we learn everything on independence financial literacy.
What is Basic Financial Literacy?
Possessing financial literacy or being financially literate typically means having skills that help you understand how to use money wisely. Financial basics are crucial for successful adult life as you can make better, effective, and informed decisions in regards to money management.
It’s excellent to understand financial terms and have them readily available. However, what sets you apart from the crowd is the ability to apply the terminologies in your everyday life. In turn, you’ll enjoy a lifetime of financial stability.
Financial Literacy Statistics
After looking at various ways involving financial literacy definition, having statistics behind it is inevitable. There are many statistics to keep you financially educated, but I’ll simplify it below.
- Time magazine estimates 56% of American adults of having less than $10,000 saved for retirement. The figure represents a combination of 33% who’ve collected nothing, and 23 %, with a small amount as savings.
- On the other hand, NFCC confirms that around 3 in 10 adults are saving money, as compared to previous years. Most of the people falling on this gap are Millenials (18 – 34) years. Additionally, generation X (34 – 44) years are following this saving trend.
- Career Builder confirms adult American earning citizens live from paycheck to paycheck.
- NFCC further reports that most US adults (61%) have had a credit card from the past one year. Another two in five people (38%) incur such debts every month.
- Forbes statistics show that 44% of Americans lack enough money to cater for $400 emergency cases.
- Lastly, according to Fortune, two-thirds of American adults cannot pass a simple financial literacy test.
What Does It Mean To Be Financially Literate
Financial literacy means possessing the understanding and education in several vital areas such as:
- The stock market, 401ks, how investing works
- Credit scores and credit cards
- Fundamental loans (mortgages, debt, personal, etc.)
- Saving money and paying bills.
- Setting financial goals and budgeting
You can’t equate financial literacy to rocket science. It doesn’t happen automatically. Most schools aren’t equipping learners with knowledge of personal finances. As if that isn’t already disastrous for the upcoming generations, family members and parents either lack the experience for children to learn or are misinformed.
How do you go about getting the necessary information on financial literacy? The trick is in learning and getting as much knowledge as possible on everything regarding money. Besides, you can choose to enroll for a short course on economics in your adult life.
You may blame the school system, environment, or parents for not equipping you with substantial knowledge about finances. Yes, they could play a role. However, as an adult, you must be in control. The good things, schools in some districts, have begun incorporating financial literacy in their curriculum. However, until it’s adopted universally, we still have a long way to go.
Apart from being financially educated, I’ll provide some key points in the next section of achieving financial literacy on your own.
How To Achieve Financial Literacy On Your Own
Financial literacy is entirely your responsibility. Especially if you weren’t lucky to get any education regarding the subject. Not all is lost per se; the digital age has proven to provide useful information whenever necessary.
Everyone has a different schedule making learning for each different. I recommend taking your time, so you do not end up missing on the crucial aspects. Having written all that; here are tips that will pave the way for your financial literacy.
1. Hit the books
You want to be financially educated. Books are vital in helping you have some sense of financial literacy. Coming from a background with no education or managing finances, I needed to learn everything regarding the right money decisions. Books significantly changed my views on spending.
Dedicate at least 1-2 hours weekly reading books about money management. Some of the books that have helped in this journey include:
- Your Money or Your Life by Vicki Robin and Joe Dominguez
- The 4-Hour Work Week by Timothy Ferris
- Think and Grow Rich by Napoleon Hill
- The Boglehead’s Guide to Investing by John C. Bogle
These are just some, but to name a few, of the books that significantly shaped my financial knowledge.
2. Read magazines and online publishers
The only way to learn is through reading. Likewise, online publications and magazines expand your knowledge in regards to financial education.
Think publications such as Fortune, Financial Times, and Kiplinger. Like me, their blogs focus on personal finance. Other websites that might be of interest include MarketWatch, Investopedia, GoBankingRates, BiggerPockets, Student Loan Hero, and Bankrate.
3. Use Financial Management Tools
Thanks to internet and technology, you can use many tools for finance proficiency. Finance management ceases to be boring or hard once you start to employ the available methods.
Apart from helping you visualize and organize your financial mindset, you get to know of other existing tactics.
Most of these tools have great blogs and centers of learning. Companies like Blooom, Mint, Personal Capital, and YNAB will help you intensify your financial literacy.
4. Listen to money podcasts
Because of the busy schedule and family, getting time to read may pose a challenge. Here, podcasts come in handy. Podcasting is broad. The good news is various podcasts are available that you can tune to whenever you have the time.
The list of good ones is endless. Most of them vary from 10 minutes to an hour with information worth listening. You will be spoilt for a choice to make.
5. Take a financial literacy class
Aside from online publications and books, taking up a financial literacy course is another viable option. From adult education centers, college courses, or at an online school, there are many places to take up the lessons.
It helps if you feel you’re in need of leveling up your finance management. Most of these lessons are paid, but free ones are available.
6. Get your math on
Most financially educated individuals possess top-notch necessary math skills. Having the original formulas readily available helps you master the saving percentage and ways of organizing money.
Free software and spreadsheet might make everything easier. Nevertheless, knowing why a certain number appears at a particular place is essential. When you do calculations by yourself, you know how math works, and going about all the numbers is easy.
7. Read the Government resources
At some point, we all have doubts when it comes to government, and what it can offer. However, it’s worth noting that government bodies like the treasury have useful information on personal finance. Visit the treasury website to find out more plus other resourceful links.
8. Break your consumer mentality
At first, the consumer mentality is unavoidable. Unfortunately, for most Americans, it’s a challenge they encounter a lot of time.
Nowadays, every place has advertisements, where the media promotes a lavish lifestyle, and social media makes people envious because they try to compare themselves with what other people have.
As you employ the financial literacy mindset, eventually, you develop an investor mentality and do away with a consumer mentality. Your objective is more about using money on important stuff.
The Benefits of Financial Literacy
After getting some tips on gaining financial literacy, you’re probably getting to know how best to manage your finances. The benefits are immense, and they will have a positive impact on your present and future investments.
If you haven’t been entirely convinced, here are more benefits of being financially literate.
Avoid and eliminate debt.
One big hurdle affecting the majority of the young generation is debt. Once you are financially educated, you begin to understand how to avoid accumulating debt and make better use of money.
Furthermore, you get the necessary knowledge to save money for the future to live comfortably.
You gain control
Instead of letting money take control of your life, you gain sufficient knowledge of managing personal finances. You end up gaining confidence and making the right decisions when it comes to money.
Additionally, you develop a positive attitude with finances. Your outlook about money changes for the better.
Value financial goals
Upon gaining enough financial knowledge, you assert yourself towards setting the best personal goals. Aside from these, you become inclined towards going the extra mile and achieving those goals. Stick to the plan, and the bigger picture, you’ll get there eventually.
Easily identify fraud
Although a topic that most people steer off, being financially educated opens up your knowledge of fraud in the finance space. Catching the red flags with banking, investing, or any other moneymaking institution becomes easy. It also places you a better place when making any decision relating to finances.
In case you need assistance, always consult with financially literate experts. You become smart enough to know when someone gives you advice that may cause you to lose money.
Furthermore, there is a sense of knowing how money works; hence, asking the right questions isn’t a problem.
After reading intently on how to become financially literate, why not take a short course to enable you to become financially educated.