Financial literacFinancial Literacy
Financial literacy is the effective understanding and management of one’s money. The skills and basic knowledge that come under the parameters of financial literacy include budget management and saving and investing management and handling of debts. Inadequate financial knowledge is among the Trojan horses that leave many scrambling for financial salvation not on the grounds of adequate pay.
Importance of Financial Literacy
A consumer is liable to fall into the traps of debt and overspending and forget to invest for the future when they do not have the understanding of finances. A person who does not understand how credit card interest works may pay off debts by only making minimum payments for very long periods of time. Thus, credit card debt can grow quickly and become almost unmanageable.
Important financial skills to learn:
Budgeting: Keeping a budget will help people track their income and their expenditures in order to provide a way of thinking about spending. A common simple method is the 50/30/20 plan, devoting 50% to needs, 30% to wants, and 20% to savings.
Saving and Investing: Putting away $200 a month with a modest return of 8% results in accumulating over $50,000 in a decade. Starting out early puts an employee ahead to gain stability in their finances.
Debt Management: The training in financial literacy allows the individual to know good debt from bad debt, say for instance business loans and high-interest credit card debts.
