Financial Literacy
Financial literacy is a broad term but understood by few schools and corporations. By definition; financial literacy (FinLit)Iis the knowledge, skill, and understanding to make smart choices with money. It does not include that accessibility, psychology, and privilege come with that as well. FinLit is an umbrella term to know how to earn, budget, save, invest, and borrow to you best financial success. Having the skill to not only use money but understand money can help you reach your own personal financial goals in order to build a secure financially free future. The core principles of FinLit are earning, budgeting, managing debt, saving, investing, borrowing, and protecting.
Earning is the understanding of how much you are receiving each week as income, easiest principle there is, if you earn more you will have more but there is always a balance. The key is also knowing your expenses and the balance between incoming and outgoing cash flow. Budgeting/management is tracking your money inflow and outflow; knowing exactly where it is coming from and where it goes and how to best utilize each dollar to maximize savings. Plans expenses so you can separate your needs from wants so you do not spend above your means and require urgent solutions that will blur your judgement. Saving is a principle that most people do not even get to do. Putting away extra money for emergencies or future larger goals. Setting financial goals for both short-term and long-term needs and potential changes.
Investing is the next tier to saving as you cannot even process investing if you do not have a certain amount of money stored away for a rainy day. This is the principle that society feels is for the “experts” and “professionals” yet gate keeps how to understand it. Investing should not only be for the ultra wealthy or finance majors of the world. Let your money work for you so the growth continues even when you are not working on it. Borrowing requires a bit more education and effort to learn credit scores and how to increase yours. Also how interest works and which debt is the best to assist you (credit card vs loan). Lastly, and arguably the most important. Protecting your assets and your financial future. Using insurance and safe banking to the best of your ability to keep your assets and valuables secure.
This all matters in order to avoid scams and traps or horrible debts. Once you start digging, it can get much harder to dig yourself out. High interest loans with immediate gratification of quick cash can become easily an option, especially with new options like Klarna or PayPal that do not require credit scores. It also helps build safety nets and layers of wealth. Knowing how to budget, save, and invest can have you protected from unexpected job changes or emergencies while maximizing your profit. Secures your future and retirement to manage long-term funds.
The unspoken part of all the fancy books and professors tell you; or now a days the influencers that try to tell you how to earn a quick buck. Financial Literacy is also about access and advantage to having the time and space to learn and understand FinLit. If you are already fighting debt and working three jobs to make ends meet, you probably won’t be sitting down every night trying to figure out the hundreds of definitions and books there are to understand the complex foundations of each section of FinLit. Sometimes it is an in general understanding that is needed but even that can feel overwhelming. There are many barriers placed for people to not understand their own finances. FinLit should be a basic need for all to obtain.
