Financial literacy refers to their ability to comprehend financial issues in a manner that allows them to make sound financial decisions. It involves knowing how to prepare a budget, recognizing what impacts different loan terms could have on credit, and knowing the investment options that can be used to save for retirement.
Having adequate knowledge about financial concepts can help individuals avoid pitfalls like excessive debt, costly investments, or a weak credit score. It also allows them to save money and achieve goals such as buying a new car or funding their children’s college education. Financially-literate people can save money for unexpected expenses, such as COVID-19 or home repairs and easily access funds in an emergency.
It’s not a secret that Americans aren’t as proficient in financial literacy. However there are ways to improve this. There are numerous online resources and apps to teach you how to manage your money. Robo-advisors can give insight into investing strategies. Community organizations provide workshops and educational materials. It’s also important to keep up with financial news, updates and topics to be aware of any changes in regulations or other pertinent topics.
In a recent poll, 38% of respondents reported that their lack of financial literacy cost them $500 or even more. To address this we must create flexible financial education courses that allow students of the millennial generation to learn at their own speed instead of being required to finish the entire course.
