What Is Financial Literacy?
Financial literacy is the skill where you are able to understand finance( money) and ability to use a variety of financial skills, which includes management of personal finance ,budgeting your income, making right kind of savings and investing.
Financial literacy helps people make better and profitable decisions of their hard earned money. It also helps avoid making poor financial decisions and help them become balanced and hence achieve financial stability.
Important steps to achieve financial literacy include
- Create a budget
- Tracking your expeditures
- Paying off the debt
The Importance of Financial Literacy
Financial literacy involves learning how money works, achieving required financial goals, becoming aware of financial practices, and managing financial challenges that comes your way.
It has been observed in a survey conducted at national level that only around 30% people who took the survey are aware of financial knowledge. Knowledge regarding basic but very important terms of financial literacy such as budgeting, savings, investment, term plans, inflation, compounding of money etc.
If you lack financial literacy you will end up making least use of your income. While on the other hand, a person with better financial literacy makes better decisions in spending, saving, investing and even in decisions related to loan take ups etc. and overall budgeting of his income. People can make better retirement planning. Most of the people are not aware of the money market as they are unaware of the basic financial education. Making informed financial decisions is very important.
What are the Personal Finance Basics
Financial literacy guides an individual in financial decision-making.
How do you manage your money? Which savings plan and investment plan are you using?
Personal finance is all about achieving your own financial goals—like owning a home, helping family, saving for your children’s higher education, retirement plans or things important for you. It involves banking, budgeting, managing your monthly debt and credit, and investing in a right manner.