What is financial literacy and why is it important?

When we’re kids, we start going to school and learning the basics of the alphabet before tackling a variety of other subjects that will help us become better adults. There’s a similar concept in personal finance: financial literacy. You might ask yourself: what is financial literacy and why is it important?

Finance is not an easy subject and it’s crucial to start from the basics. If you’re interested in understanding more about financial literacy, you’ll find valuable information here. Go ahead and discover how you can achieve a better level of financial literacy and improve your relationship with money.

What is financial literacy?

Everyone wants to feel comfortable with money, either  struggling less about  it or in the emotional sense of it, by not feeling anxious or nervous about it. Financial literacy is the way to achieve that. it. But what is financial literacy and why is it important?

Financial literacy is the understanding of financial concepts that lead to financial well-being. It includes the basic knowledge of money and financial topics that directly impact your everyday life. 

Why should you learn about finance?

Financial literacy is the foundation of a healthy relationship with money. By understanding the mechanisms of money management, you become smarter and savvier. 

That’s why financial literacy is important: with the right tools and knowledge, you’ll be able to save, spend, and even borrow money responsibly, in a way that can help you move towards your financial goals, instead of compromising them.

The lack of financial literacy can lead to poor decisions that can compromise your future, such as accumulating multiple outstanding debts, a poor credit score, and even housing foreclosure. 

Unfortunately, that’s a reality for many Americans: 66% of Americans are considered financially illiterate, according to the Financial Industry Regulatory Authority (FINRA).

Taking the initiative to educate yourself and seek knowledge about this important area of our lives is a way to make mindful decisions that can lead to  better outcomes. When you understand and use various financial skills, you put yourself in a path to achieve your financial goals. 

Financial planning

An important part of financial literacy is knowing how to plan financially. Financial planning is the process of formulating a plan to achieve your financial goals or milestones. It’s a way to understand your relationship with money and establish steps that move towards your goals. 

Financial planning is about more than just saving money. It’s about taking responsibility of your actual situation and making the best outcomes from it. When designing (and actually following) a financial plan, you’re able to see a clear path towards your goals.

Financial planning helps you lay out the steps to achieve a financial goal or milestone. It may be purchasing a house, paying off debt, paying for wedding festivities, a dream vacation or just achieving financial stability. 

Where to start my financial literacy?

Now that you know the answer to the question “what is financial literacy and why is it important?”, you’re probably aching to get some knowledge. But where to start? It can be intimidating to look for information in a sea of sources. But fear not! Here are a few tips on how to start building financial literacy:

• create a budget. Write down how much you earn, all your fixed and variable expenses, and set an amount for saving. Starting from these three basic steps will help you paint an accurate picture of your finances every month;
• keep track of your spending. You can start using a spreadsheet or an app to keep track of everything you spend — that way you’ll know where you are spending more than you should;
• revise all your credit cards and credit accounts frequently. Analyze your usage, calculate any extra fees and cancel any unnecessary cards or accounts;
• pay attention to all fees and taxes you pay on your everyday activities . Once you put everything on paper, you’ll be surprised by how much you spend on taxes and fees without even noticing;
• manage your debt. Stay on top of your debt, build a plan to pay it all in a timely manner, and consolidate any outstanding debt;
• read books, go to seminars, and enroll in classes about personal finances. There is a lot of accessible information on the internet, ranging from ebooks to online classes and seminars;
• start following websites and social media about financial education, such as Youtube channels on the topic and specialized profiles on Instagram or Facebook.

We can help you!

Now that you know what financial literacy is, it is crucial to know where to look for help. A big part of this is also knowing where to go for financial services and specialized resources.

OneBlinc has a Toolbox designed for helping you evaluate all important aspects of your financial life. At OneBlinc Toolbox, you’ll find a complete list of services that can help you save money and achieve your goals.

At OneBlinc, you’ll find a team of experts dedicated to help you find the best financial solutions for your needs. Our team of experts are here to provide you information about financial services and give you support in your financial decisions.