Have you ever come across the term "financial literacy"? Does the term sound complicated to you? Do you consider yourself financially literate?
In this blog, we will learn about financial literacy, why it is important, and how to become a financially literate person.
Simply put, financial literacy is understanding your finances. It involves learning money management skills, keeping track of your expenses, learning concepts of investing and borrowings and making wise decisions.
Why is financial literacy important?
Financial literacy is a crucial skill in today’s era. You cannot solely focus on earning money and expect your money to grow over time if you are unaware of how to manage it well. Hence, financial education is vital.
Here's why financial literacy is important:
●It helps expand your knowledge in the finance field and make wise decisions in life
●Assist in understanding financial concepts like debt, interest rates, credit scores etc
●Aids in reaching one's financial goals
●Protects you from frauds like online scams
●Increases your confidence in life
Best ways to become a financially literate person
Learn financial jargon
You cannot expect to understand advanced English if you don’t know the basics. Similarly, to learn and comprehend technical and financial concepts, you need to understand the basic terms like debt, asset, liability, capital, equity, depreciation etc.
Learn about budgeting
You must have heard from people like budgeting isn’t needed, or you need solely to focus on earning more, but that's not true. It is vital to know where your money is coming from and where it is going. You must have a record of every penny earned and spent. This will help you in reducing unnecessary spending habits.
Understand saving and investing
A lot of people want to retire early, but earning more money doesn't necessarily mean you're getting wealthier. Usually, when a person earns more, they spend more. It is important to lower expenses and find ways to save money to become wealthy over time
You must know what credit is and how it works, as credit is an essential part of life. Your credit history reflects your creditworthiness. You must learn some common concepts about credit, such as the importance of credit and how to improve your credit score.
Get help from finance experts
Once you have gained enough knowledge about the basics, it is time to talk to experts who specialize in the specific field. Financial experts can help you in managing your debt and finances better and assist you in reaching your end goals. Having ample knowledge provides you with relevant questions to ask experts.
Now that you know what financial literacy is and its importance in one’s life, you must know the actual learning lies in execution.
This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.