Would you like to buy a house one day? How about help your kids pay for college? Maybe your goal is even smaller, you have credit card debt and are looking for a way to pay it off.
Why is financial literacy important? If you have any of these goals, you need to be financially literate to get there. And if your finances are in such poor shape that you can’t even imagine setting financial goals? Becoming financially-literate will help.
No matter where you are and what your income, there is still more to learn.
Why Is Financial Literacy Important?
The simple answer is that financial literacy is a safety net. Forget about having goals for a second. Having access to the money you need to keep a roof over your head and food in your house should not be taken for granted.
Around 30 percent of adults have no savings, and an even greater percentage would have trouble paying an unexpected emergency expense. Anyone living paycheck to paycheck is in danger from something as simple as illness or a minor accident.
One-off financial advice is helpful but more important is learning how to understand money and how to use it. Listening to the Wealthability podcast while commuting or taking a walk is a great way to learn more about personal finances.
What Does Financial Literacy Include?
Financial literacy covers anything related to your money. You can learn to stay on a budget, how to handle existing debt and avoid additional debt, as well as the difference between bad debt and good debt, how to handle your taxes, how to save more, what to expect during the home buying process and more.
Once you are comfortable with basic facts about financial literacy, you may dive into more complicated matters like investing. Sound scary? Once you get started you may be shocked by how straightforward investing can be.
You may think you will never be in a position to invest, but even your retirement program from your employer probably involves some investing. Sure, you can just stick with whatever the recommended default is. That’s fine, but you should at least understand what it means.
How Financial Literacy Protects You
Financial literacy helps prepare you for when something goes wrong. You may pay your bills on time and have money left over to do something fun occasionally, so you assume you’re in good shape.
The problems crop up when the unexpected happens. Illness, job loss, even having your work hours reduced, can have a cascading effect on your finances if you aren’t prepared.
Those with less financial savvy are more likely to fall victim to expensive financial solutions such as pawning items or taking out a payday loan. These are only stopgaps. They won’t solve your financial crisis, in fact, they only make it worse.
Understanding finances helps you find ways to have money tucked away for emergencies, coaches you towards a strong credit score in case you need to borrow money, and stresses the importance of putting money away for retirement.
Is It Too Late To Learn?
Getting financial advice as you grow up makes it easier to transition to living on your own, but plenty of people don’t have that luxury. Many parents wonder, why is financial literacy important? Times have changed dramatically since they entered the workforce.
The cost of living has outpaced wages and employers expect employees to take on more responsibility for their retirement, literacy education has never been more important.
It is never too late to break bad habits and start savings. Take a look around this site for more information on savings and spending.