The Importance of Financial Literacy

Financial literacy is the understanding and ability to manage financial resources such as cash, assets, loans, mortgages, investments, budgets, and so on. Even though it's an essential skill, most people know little to nothing about it. Furthermore, many people just decide not to care. However, we have seen a rise in interest in financial literacy among young people worldwide in recent years. This is good news for all of us, so let's examine financial literacy and how it works.

Personal financial management skills are the focus of financial literacy; other financial management systems exist at the corporate level. Financial literacy is a crucial tool people can use to achieve financial stability and protect themselves from financial fraud in the modern period when financial resources like credit and debit cards, stocks, and bonds have become more widely accessible.

In addition, acquiring financial literacy will help people understand their financial products, such as loans and mortgages, which could help them avoid debt traps like high-interest rates or mortgage traps. Another thing to note is that financial literacy helps people avoid disastrous errors like floating rate loans, which can push people into bankruptcy or prevent them from saving for emergencies. The achievement of personal objectives or the development of self-confidence can both be facilitated by financial literacy.

There are countless advantages to gaining financial literacy, and there are numerous methods for doing so. These methods include making a budget, saving money before spending it, paying bills on time, keeping track of credit card bills, and many more.

The Financial Industry Regulatory Authority (FINRA) reports that 66% of Americans lack financial literacy, which is concerning but the good news is that young people in our countries are becoming financially literate and raising awareness about it as well. As a result, we have a long way to go to spread financial literacy awareness.

References:

1. Investopedia

2. Wikipedia

3. The Economist