Financial Literacy

Top reasons to know become financially literate

Financial literacy is the seamless mix of finances, credit and debt management and the knowledge that is essential to make financially sound decisions – decisions that are vital to our daily lives. Financial literacy includes understanding how a checking account works, a credit card versus a debit card, and how to avoid debt. In sum, financial literacy impacts the daily issues an average family makes when trying to balance a budget, buy a home, fund the children’s education and ensure an income at retirement.

Do you balance your bank account? Checks are fast disappearing and electronic credits and debits make it harder individuals to manage their finances and almost unbearable for anyone who is not financially literate. A rule of thumb to remember- Your expenses should ALWAYS be less than your income/cash.

A lack of financial literacy is not a problem only in emerging developing economies. Consumers in developed or advanced economies also fail to demonstrate a strong grasp of financial principles in order to understand and negotiate the financial landscape, manage financial risks effectively and avoid financial pitfalls. Nations globally, from Korea to Australia to Germany, are faced with populations who do not understand financial basics. The level of financial literacy varies according to education and income levels, but evidence shows that highly educated consumers with high incomes can be just as ignorant about financial issues as less-educated, lower-income consumers (the later tend to be less financially literate). And it seems consumers are hesitant to learn. The Organization for Economic Co-operation and Development (OECD) cited a survey conducted in Canada that found that choosing the right investment for a retirement savings plan was more stressful than a visit to the dentist.