Tips to Improve Your Financial Literacy
In this day and age, many Americans, especially younger adults, can be classified as ‘financially illiterate’. A study conducted in the recent past states that nearly two-thirds* of Americans can’t pass a basic financial literacy test. Most of these people don’t know how to manage their finances because they were never taught how to do so. Although people have greater access to more information than ever before, the financial world has become very complicated too. The result is a significant gap in the financial knowledge of many individuals.
Financial literacy involves having a good understanding of core finance-related areas such as paying bills, saving money, budgeting and setting financial goals. Being financially literate also means that you know how loans, credit cards and investments work.
What is the Importance of Financial Literacy?
Financial literacy is very important as it helps gauge and enhance your current lifestyle while helping you assess how comfortable you will be in your retirement years. As the years pass by, the benefits of mastering your finances are manifold. Being financially literate can make your life less stressful as you can determine your financial standing and know what needs to be done in order to achieve financial stability throughout your life.
In addition to helping you gain control of finances, financial literacy can also assist you in avoiding and eliminating debt – something many Americans struggle with. With sound financial education, you get a better understanding of how debts work and how you can avoid the potential disasters that accompany them. Financial literacy also empowers you to set, plan and achieve your financial goals.
Ultimately, financial literacy can help you manage your finances optimally.
Tips to Improve Your Financial Literacy
When it comes to financial literacy, everyone is at a different level and learning curve depending on their current stage in life. However, the following tips can be used by anyone to improve their financial literacy irrespective of where they find themselves in life:
1. Consume as Much Information as You Can
Begin reading newspapers, magazines and books that are geared towards financial matters. Even podcasts and blogs are good means of consuming information. However, you should remember that you are reading or hearing about someone’s particular point of view towards any subject. So, gather as much information as you can before you make a final judgment of your own. Reliable sources for financial information include the Wall Street Journal, Fortune, Forbes and Money, amongst others.
2. Master the Fundamentals
One of the major steps you can take towards improving your financial literacy is to master the foundational concepts of the financial world. Fundamentals such as compound interest, account types, investment diversification and the time value of money can help you manage personal finances effectively. So, even though the difference between a checking account and a savings account might now be the most interesting topic, don’t shy away from learning about it.
3. Take a Financial Literacy Course
If you are looking to delve deeper into the world of finance and want expert guidance for improving your financial literacy, consider enrolling yourself in a financial literacy course. Many online schools, colleges and adult education centers offer financial literacy courses that can help you. While most of these courses are paid, there are some free online courses that you can learn from. For instance, Brigham Young University offers free online beginner, intermediate and advanced financial education courses.
4. Make Use of Government Resources
The U.S. government is making a conscious effort to educate American citizens about personal finance. There are many useful and trusted resources on several government websites that can help improve your financial literacy. The Financial Literacy and Education Commission’s MyMoney.gov website can teach you the basics of personal finance. It contains advice on various common subjects such as investing, buying a home, balancing a checkbook and much more. You can also find a lot of information on the U.S. Department of the Treasury’s website.
5. Use Financial Management Tools
The advancements in technology have made it very easy and interactive to manage your finances. There are a majority of tools that can help you manage finances efficiently while helping you improve your financial literacy simultaneously. Organizations like Mint, Bloom and many others offer tools and services that you can aid you in learning about topics like savings, credit cards, mortgages and much more. The budgeting and financial planning app by Mint is a popular option that won’t cost anything out of your pocket. Automated savings apps like Chime can also be used to help you save more efficiently.
5. Take Help From Your Social Network
While there are numerous resources that can help improve your financial literacy, you should also utilize the financial knowledge of your social network. Family members, friends, co-workers and the like can often give you expert advice about finance-related matters. The experience these persons have gained and the lessons they have learned along the way can be passed down to you when you take help from them. So, don’t hesitate to leverage the knowledge of people in your network to improve your finances.
6. Ask for Expert Advice
Financial planners and advisors are astute professionals whose job revolves around providing advice and guidance on finance-related matters. Employing the services of an experienced financial advisor can help improve your financial literacy. Such advisors can assist you in a wide variety of areas such as budgeting, saving, handling debts, consolidating finances, achieving financial goals and much more. Owing to the immense knowledge they possess related to finances, asking for expert advice from financial advisors is worth considering.
To Sum it Up
Financial literacy is very important towards living a stress-free and comfortable life. Ultimately, money is one of the most important needs in your life and thus, knowing your finances well is crucial. Make use of the tips mentioned in this article to improve your financial literacy and get started on your way towards financial success.
If you want a less challenging means of becoming financially literate, do get in touch with top financial advisors today.
The *National Capability Study by the FINRA Foundation