Having financial literacy is an essential life skill that can have far-reaching impacts on one’s future financial security and well-being. Financial literacy is the ability to understand and effectively manage various financial skills, such as budgeting, saving, borrowing, and investing.
What is financial literacy?
Financial literacy is the ability to understand and effectively apply various financial skills and concepts to make informed decisions about personal finances. This includes competencies like budgeting, saving, investing, managing debt, understanding interest rates, planning for retirement, and more. True financial literacy goes beyond just balancing a checkbook. It involves a holistic mastery of critical money management principles that allow you to confidently navigate an increasingly complex financial landscape.
Why does financial literacy matter?
Having financial literacy provides numerous benefits. It allows you to make well-informed decisions about spending, borrowing, and growing your money through wise investing and retirement planning. With solid financial literacy, you can avoid costly mistakes that come from a lack of understanding. Financial education also empowers you to gain control over your finances, reduce money-related stress and anxiety, and ultimately achieve financial freedom and independence. Developing strong money management habits like budgeting from a young age sets you up for a lifetime of financial confidence and responsible decision-making. Financial literacy is key to providing for your family, building generational wealth, and leaving a lasting legacy. In our increasingly complex financial world, having financial literacy is critical for budgeting your income, understanding how to qualify for a mortgage, paying your taxes, evaluating your insurance needs, investing your money, and optimizing your overall financial well-being.
Despite the clear importance of financial literacy, studies show that many people lack even basic financial skills and knowledge. Fortunately, this skill can be improved at any age by taking advantage of the numerous financial education resources available online. With the right tools and mindset, everyone can boost their financial literacy.
Here are 7 effective ways to boost your financial literacy:
1. Take an online course or class on personal finance fundamentals through your local college, bank, credit union, or workplace. Coursera, offered by Google, offers several free online courses that you can do at your own pace, including Financial Planning for Young Adults.
2. Read books and listen to podcasts by respected finance authors and experts to keep building your knowledge. Two popular books for financial literacy are, “The Total Money Makeover,” by Dave Ramsey and The 9 Steps to Financial Freedom,” by Suze Orman. Two influential podcasts are “Planet Money” and “Millennial Investing.”
3. Follow finance influencers and educators on social media for tips, lessons, and accountability. Once you start following influencers, the platform’s algorithm will suggest additional influencers to follow. To get started, check out these homeownership-focused finfluencers on TikTok and Instagram: @chaddjohnsonkc @yourmortgageguide_ @got_mortgages @whatsamortgage @anutterhomeloan @themortgagekitchen @mortgagedadof3 @alicekcgirl on IG @manifestmortgage on TikTok
4. Speak to a qualified financial advisor for personalized guidance for your situation. Start by asking the financial institution where you have your 401(k) Roth IRA or SEP IRA, if you’re self-employed, if they provide financial advisors.
5. Build your credit score by knowing the impact of the factors that influence your credit score. Click here to obtain actions you can take to improve each factor.
6. Automate your savings by setting up automatic transfers to separate savings accounts. Many employer payroll systems allow you to deposit a portion of your paycheck into a different account, making adding to your savings with each paycheck easier.
7. Visit the FinLocker Consumer Learning Center for more advice to improve your financial literacy. There are articles to help you achieve your financial goals, budget, save for a down payment and buy a home.
Financial literacy is one of the most valuable life skills you can attain to achieve financial security. It empowers you to make well-informed money decisions, reduce stress, achieve financial freedom, provide for loved ones, and leave a lasting legacy. Start taking steps today to improve your financial know-how; your future self will thank you.
