This is financial literacy 101. Continue reading to understand how financial knowledge can save you from any financial crisis.
Almost all of us start earning from our college days. Be it tuition or any part-time work – we get the taste of money from very early on.
But, as a youth, we are clueless when it comes to saving and investing money.
As soon as we begin our careers, most of our parents encourage us to start investing so that our future becomes secure financially. But here comes the gap.
Almost all of our parents or elders have saved using traditional investment methods like bank FDs, post office savings schemes, jewellery, or real estate.
But today, the time has changed. The options are now endless. We now have many new ways to invest and build wealth.
At the same time, we are confused about how much to invest and where.
This is called financial illiteracy. This is why having financial education is so important. But the irony is it is still overlooked in our society.
Think about it. If you don't teach your children about money, how do you expect them to become financially smart when they become adults!
Here is why financial literacy matters among youth
Financial literacy is important to manage everything from day-to-day expenses to long-term budgeting or handling financial crises.
Someone who doesn't know about managing their finances is more prone to fall into financial traps unknowingly.
Therefore, to secure your financial life, financial literacy is critical.
Grow wealth by investing
Almost all of us millennials depend on salary. But to learn investing, one should become financially literate about learning the right strategy so that you earn substantial profit over the years.
Instead of letting the money sit in your savings bank account, imagine how much you can grow by investing in the right financial products. This will secure your future and you will see how much your money can multiply.
Save yourself from bankruptcy
Having emergency savings help you prevent debt accumulation and handle a financial crisis. A financially literate person only can understand the importance of having an emergency fund — 6 to 9 months worth of expenses.
Having a cushy retired life
You might have heard your elders saying if you save today, you will have a comfortable life where you don't have to worry about day-to-day expenses.
What about living your life today?
Preparing for retirement while achieving all your short-term goals and living your life to the fullest is a sign of financial literacy.
Understanding how much money you need to save based on what kind of retired life you want for yourself is how you become financially savvy.
Discovering your true cost of living
All of us are extremely health-conscious, so if you are craving an avocado salad, would you consider making it at home or ordering from a restaurant and paying additional taxes, delivery charges, and service tax?
Think about it. Small things like these add up, and this is how you end up spending more than you might have anticipated.
This is why budgeting is so important. It is the first step of financial literacy budgeting, which allows you to genuinely understand your income and spending.
Once your budget gets fixed, you can quickly identify and reduce your impulse spending. An actionable plan can help you keep on track and discover your actual cost of living.
How financial literacy can prevent financial crisis
Prolonged lockdown during the COVID-19 pandemic pushed the world towards economic depression. The unorganised sector was the worst hit. Majorly due to their lack of financial literacy.
Needless to say, financial literacy is nothing but having the skill sets and knowledge that allows a person to make informed and effective decisions about his or her finances.
Due to financial illiteracy, we buy a plethora of things that are not crucial for our living. Also, because of the same thing, we tend to overspend and fail to save and invest money.
As a result, when the financial crisis hits, we struggle to survive. Financial literacy and budgeting are essential to prevent a financial crisis.
Read our blog on four quick tips to know more about how you can become financially free with the help of financial literacy.
How to improve your financial literacy?
We all have some level of financial literacy. Maybe you have provided a fund from your company, but you don't know how else you can plan for your retirement.
Your company may have offered you health insurance, but you don't know how having additional insurance can help you plan your taxes and ensure your family's security.
Wherever you may be on your journey to have a secure financial future, there are some ways you can improve your financial literacy.
Listen to financial podcasts
Podcasts are great ways to soak up information. Subscribe to popular financial podcasts and listen to them while you do your house chores, run an errand, or during your free time.
Read books on personal finance
If you prefer books, the choices are endless. There are thousands of personal finance books available in the market. Learn more about credit score, debt, and budgeting.
Don't just read about them. Apply the knowledge in your life. Take baby steps with simple investments and your financial security.
Watch YouTube Videos & Follow Influencers
Today, social media has a critical role in improving almost every part of our lives. Finance is one of those parts.
Many influential YouTubers like Rachana Ranade, Pranjal Kamra, Akshat Srivastava have some great information about various ways of managing your money. Follow such leading financial influencers to become financially wise.
Use financial management tools
When it comes to financial management tools, you will be spoiled with choices. Stools make your life easier. Financial management tools include expense tracking, budgeting, spending management, etc.
These tools help you easily monitor your expenses, automate your payments, create your budget and help stay within it.
Take help from a financial expert
Never shy away from asking for help. When you are confused about a financial product and having a hard time making a decision, seek help from professionals.
They are there to answer your questions. They can help you correctly assess your current financial state and suggest ways to stay on track.
We hope this blog has helped you. To sum it up, the importance of financial literacy is endless. The mistakes you make in your youth will help you grow in your adult life.
Therefore, it is essential to become financially responsible. It is not an easy process. It's a prolonged one.
So, keep yourself updated about all the new avenues and developments in the personal finance space and make informed decisions.