When you were younger, did you learn how to manage your money? If so, you have a higher chance of having a healthier relationship with your finances.
But if you didn’t have a chance to develop those skills, it can set you back up to $10,000 a year.
Knowing how money works is one of the most important things to learn to create wealth. Besides avoiding debt, you can reach your financial goals faster and dramatically boost your quality of life.
Our article will discuss the countless benefits of financial literacy and the resources you can use to manage your money from now on!
What Exactly Is Financial Literacy?
Financial literacy is your ability to understand the basics of how money works. Some crucial aspects include:
- Creating (and sticking to) a budget
- Understanding how debt works
- Investing strategies
- Paying your taxes
- Saving money
- Long-term financial planning
When you lack these skills, you’re considered financially illiterate. Not having these skills makes it harder for you to get ahead financially.
Lack of money management is also not an isolated issue. Roughly 43% of Americans are financially illiterate, and less than half of the country’s schools offer mandatory finance classes for students.
Benefits Of Being Financially Literate
Building your financial literacy skills takes time, but they’ll improve your life. Here are the best perks of being financially literate:
You Can Manage Your Finances Confidently
Many financially illiterate people will have to rely on others to pay their bills, choose a mortgage lender, or find a saving strategy that meets their needs. If those you depend on don’t look out for your best interests, you’ll quickly find yourself in hot water.
However, when you understand the basics of money management, you have the power to make the best decisions for your financial future.
You’ll Improve Your Living Standards
If you’ve been in a situation where money was tight, you know how stressful it can be to carry on with your day without knowing how you’ll cover the bills each month.
While financially literate people also get into debt occasionally, they know how to manage it efficiently. Most of them also have a much lower debt-to-income ratio, letting them live comfortably and plan for their retirement without worrying.
Understand The Power Of Long-Term Planning
Understanding the difference between instant gratification and long-term plans is part of building wealth.
For example, someone who doesn’t manage their money well is more likely to make that impulse buy or take out a payday loan without a second thought. But each decision will have long-reaching effects that affect your financial future.
On the other hand, a financially literate person can put off short-term wants and make decisions that will help them reach their goals faster.
Helpful Resources For Financial Literacy
It’s never too late to learn the skills you need to take control of your financial future.
There are tons of free or low-cost tools out there you can use. From free counseling to user-friendly apps, the information you need is right at your fingertips.
Here are a few resources to get some valuable insight:
- Personal finance courses
- Non-profit credit counseling
- Financial Empowerment Centers (FECs)
- Investment apps
- And much more!
The Bottom Line
Becoming financially literate is one of the first things you should do if you’re trying to build wealth. Most of us never learned how to do this growing up, and now we’re losing money every year because of poor financial decisions.
It’ll take time, but everything gets easier once you understand how money works. You’ll finally live a more stress-free life and make those seemingly impossible financial goals a reality!
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