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Why is it important to be financially literate? What exactly is financial literacy?
Financial Literacy means having some skills and knowledge that allow us to to make better decisions about our financial resources. By better decisions we mean well-informed and effective ones!
There is a rasing interest in personal finance in such countries as Australia, Canada, Japan, the United States and the United Kingdom! Personal finance is monetary resources management which a family or an individual performs to budget. That also involves considering different potential risks and events.
Experts usually speak about five key components of Financial Budgeting:
At least the basics!
It’s not a secret that in order to keep your spendings adequate you should create and maintain the budget. Nowadays there are many tools available, so you won’t waste too much time doing it. For example, you can use Mint.com or other budget calculators as Quicken or MoneyAdviceService.
Pay special attention to interest rates, you have to really understand them (especially such concepts as compound interest rates)!
Saving over Spending
That means the priority should be given to saving! Most of young people do not think about their future and do not pay enough attention to saving money for their retirement or some other things that are coming in the nearset 20+ years. That is so far ahead, who cares? But as soon as you realise that your well-being when you are 60+ depends on your current actions, you are going to make sure you save at least 20 percent of your income!
We advocate the 50/30/20 budget, have you heard about this system? 50 percent of your income covers all the necessities, 30 percent everything you “want”, and 20 goes to savings or for paying debts.
Here is a great calculator (NerdWallet) to use for your 50/30/20 budget!
Credit is much easier to lose than to get. Credit is a very useful tool when taken care of properly. It is better to get some knowledge on debt earlier than later. So, our tip is learn some important credit concepts and tools for responsible credit practices as soon as possible, otherwise it’ll cost you a fortune!
Last but not least, make sure you did everything to protect yourself against the identity theft! Our financial information is vulnarable to fraud, so take some preventive measures (password protection, limiting the amount of information shared online) to save your finances!