If you want to survive in the capitalist world, you need to be financially literate. Financial literacy is one of the most essential things to be successful, yet we normally don’t get familiar with this concept before we get into our colleges.
If you want to save money properly, invest in the right way, and have a comfortable retirement, you need to understand how finance works. You have to grasp the concept of budgeting, saving money, credit, etc.
In this article, we’re going to cover the basics of the elements of financial literacy so you can lead a financially comfortable life.
Let’s start with budgeting.
Budgeting: The First Element Of Financial Literacy
You can’t even handle your own life perfectly without proper budgeting, let alone becoming financially literate. Budgeting is the first and probably the most important element of financial literacy.
Without budgeting, you can’t understand where your money is going. And then you won’t be able to control your money and your finances. That’s why you need to learn the basics of how you can make a budget.
Now, don’t worry if you’re not a math superstar. If manually going through all those numbers seems intimidating to you, you can use several online budgeting apps available in the market right now.
The Interest Rates
No, we’re not trying to teach you middle school mathematics right now. In fact, we’re not even asking you to bring your paper and pencil and solve complex interest rate problems. But to become financially educated, you need to understand how interest rates affect your finance.
All you need to understand how the compound interest works. This way, you can rip the most benefit out of any future investments or minimize the damaging effects of any wrong financial decisions you take. So, understanding how it works can really make your life a lot smoother.
Savings: Another Important Element Of Financial Literacy
Saving money and assets for the future is one of the most important aspects of personal finance. Yet a lot of people, especially those who are in their 20’s and early 30’s hugely underestimate it. They keep ignoring to save thinking it’s a lot of time remaining before they retire. And that’s where they do some deadly financial mistakes.
That’s why it’s important to understand the importance of savings and you should start saving money early on. And if you have a child, then you should teach him the importance of saving. You can even make him save a small amount of money to get their desired thing.
Nowadays, thanks to several automatic savings app, you can automatically save a small part of your paycheck to a different savings account.
Understanding Credit And Debt
You can’t acquire complete financial literacy without understanding the concept of credit and debt. It’s your credit that actually determines how many financial benefits or disadvantages will get throughout your life.
If you make any harsh and impulsive financial decision that hurts your credit, it will affect you throughout your adulthood. And once you mess your credit up, it might take a lifetime to fix.
That’s why it’s wise to teach your child about credit and debt as early as possible to make them financially literate.