Financial Literacy

July 28, 2022
ACCA online vs offline classroom learning
July 22, 2022
Benefits of choosing ACCA online course provider
Benefits of choosing well structured ACCA online course provider
August 5, 2022

What Is Financial Literacy?

Financial literacy refers to the ability to understand and effectively use a variety of financial skills, including personal financial management, budgeting, and saving. Financial literacy enables individuals to become self-sufficient so that financial stability can be achieved.

Understanding Financial Literacy

Financial literacy also requires experience with financial principles and concepts such as financial planning, compound interest, debt management, effective investment strategies, and time value. Financial illiteracy can lead to poor financial choices, which can have a negative impact on an individual's financial well-being. Key steps to improving financial literacy include:
  • Learning budgeting skills - Being able to track spending
  • Learning debt repayment strategies
  • Effectively planning for retirement
These measures may also include advice from a financial specialist. Financial education includes understanding how money works, developing and achieving financial goals, and solving internal and external financial problems.

Benefits of Financial Literacy

Financial literacy focuses on the ability to effectively manage personal finances, which requires experience in making appropriate personal finance choices such as savings, insurance, real estate, paying for college, budgeting, retirement, and tax planning.
Those who understand finance should be able to answer questions about transactions, such as whether an item is required, whether it is available, and whether it is an asset or a liability.
This field illustrates a person's money habits and perceptions related to their daily life. Financial literacy shows how an adult makes financial decisions. This expertise will help an individual create a financial plan to define their income, expenses, and liabilities. This topic also affects small business owners, who contribute significantly to economic growth and stability.

How to Manage Your Money

Getting your finances right should be a priority and guide your everyday spending and saving decisions. Personal finance experts recommend taking the time to learn the basics, from how to manage a checking or debit account to pay your bills on time and building.
Managing your money requires constant attention to your spending and your accounts and not living beyond your financial means.
Credit or Debit?
In addition to cash and a bank account, most people own some type of plastic, such as a debit card, credit card, or a combination of both. What you do with these tools has serious implications for your ability to build a credit history and avoid developing a borrowing habit.
Conservative financial experts recommend either having only a debit card or having both with a credit card set aside for the occasional larger payment and then paying it off immediately. This advice is often given to people who have accumulated a large amount of debt.
Starting with one of each card can help you develop responsible spending habits and provide comfort. Consider the rewards offered by both cards, especially if you travel often or make large purchases.
The main advantage of using only a debit card on a regular basis is that you spend the money you already have. Debit cards can be linked to your checking account where paychecks are automatically deposited.
Debit cards have benefits such as no limit on the number of transactions and rewards based on frequent use. You have the option to spend without having cash and the money is instantly withdrawn from your account.
Because the card is so easy to use, it's important that you don't overspend and lose track of how often you spend with this account. If you're not careful, overdraft fees can drain your account.
Savings are an essential part of a good budget. Using a savings account allows you to prevent emergencies from draining the money you need for monthly bills and slowly build up a reserve for big future purchases. This reserve can be used for car repairs, down payments on an apartment, unplanned surgeries, and other medical needs, and even to raise funds for a home deposit.
Developing consistent savings habits allows you to take advantage of time, your age, your current resources, compound interest, investments, and tax-advantaged savings.
Storage Tips:
  • SET a portion of your paycheck to automatically go into savings.
  • DO NOT leave a savings account as your last financial priority.

Credit Scores
A credit score can be a powerful indicator of your financial well-being. Equifax, Experian, and TransUnion are the primary credit bureaus and assign scores ranging from 300 (high risk) to 850 (low risk). The bureaus determine the score based on a group of factors that reflect your spending habits.
Never underestimate the importance of a credit score. Once you spend money on plastic and pay your bills regularly, you start your history. This record of how often you borrow, how quickly you repay, and how much you owe can follow you throughout your life.
Startups & Small Business
Business owners use their own savings, loans, stocks, and other sources for seed capital. It's important to research your industry and create a plan that outlines exactly how you can maintain profitability. Some people rush into business development without properly vetting a strategy for long-term success. Pursuing an exciting business idea and not considering all the costs involved can make your dreams come up short.
Startup Facts
  • There are more than 28 million small businesses in the United States.
  • One-third of new businesses close within 2 years and a half within 5 years.
  • The Small Business Administration reports that approximately 10 to 12 percent of small businesses with employees close each year.
After starting the business, the work has only just begun. Staying competitive in your industry requires following trends and adapting to changing consumer demands. From developing your marketing strategy to expanding your client reach, working to sustain a business requires constant commitment.
The earlier you start saving for retirement, the more opportunities you will have to grow the resources available to you. Average life expectancy is constantly increasing. In the United States, life expectancy is 78.74 years (World Bank). People are working later and living longer, which affects how much you'll be able to save and how much you need to last your entire life. Your personal savings account, bank, investment portfolio, and employer can all be vehicles to help you prepare for the future.

Looking into the Future

Evaluate other sources of retirement income. The Social Security Administration provides an estimate to determine the amount of your monthly Social Security payments. You'll notice that the longer you wait for Social Security payments (before reaching full retirement age), the higher your monthly payments will be.
If you're a veteran, teacher, or other government employees, you may have retirement payments to count on. Your retirement benefits can vary greatly depending on your job and employer. Make sure you are aware of and participating in all retirement plans offered by your employer.
As you age, regularly measure the value of your portfolio. You may need to adjust your funds to account for market lows or stagnant investments. The older you are, the more you'll want to invest your money in risky investments like bonds rather than volatile stocks. In addition, if you fall behind in your pension contributions, you may be entitled to larger catch-up payments, which would usually be higher than the annual maximum.

Are You Financially Literate?

To help you decide if you should qualify as financially literate, think about the following questions and give yourself honest answers.
  • Do you know how to create a monthly budget that includes all your essential expenses, bills, debts, and funds for future purchases?
  • Are you currently debt free? Or are you taking active steps to reduce your debt?
  • Do you know how much money you will spend on living expenses for three to six months?
  • Do you have an emergency fund to get you through a sudden major life event like a layoff or a totaled vehicle without having to borrow money?
  • Do you understand how compound interest allows invested money to grow over time?
  • Do you know the different types of insurance needed to protect your finances and investments?
  • Do you understand the difference between investment and insurance?
To find the answers to the above questions click the link below:
This program will be live from the 8th of August and will be conducted for 1 month. An Early bird offer discount of 10% will be valid for 1 day.
Apply discount code – CFONEXT


Request More information

    Leave a Reply

    Your email address will not be published. Required fields are marked *