Financial literacy is the junction of financial debit/credit management and the knowledge that is necessary to make financially important decisions. Financial decisions should be made with utmost care and consideration as they are an integral part of our everyday lives. 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. Ranging from pending credit card bills to payment of utility and essential items, more often than not, there’s a money crunch that almost everyone faces that leaves us feeling depleted. We live in a time where it is crucially important for youth to have a sense of financial responsibility. We need lessons in financial literacy.
Any improvement in financial literacy will have a profound impact on consumers and their ability to provide for their future. Recent trends are making it all the more imperative that consumers understand basic finances because they are being asked to shoulder more of the burden of investment decisions in their retirement accounts – all while having to decipher more complex financial products and options.
Learning how to read financially is not easy, but once mastered, it can ease life's burdens tremendously.
Financial literacy is crucial to help consumers save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy, defaults, and foreclosures. Financial education is actually skill set not only to earn money but also to retain, increase and delve out new opportunities for it. Money is one of the critical resources in our life, just like time. And it's a critical skill to learn. It's not just an academic skill but really a life skill. Financial literacy is an ability to understand money and how it works – including its management, investment, and expenditure. Being financially sound and aware always works in our favor as it enables us to make choices on investments that can help you double your balance. Even when you are busy with your professional or personal life, putting your money in the right places i.e., the stock market or the money market, can help you become more profitable.
There are numerous reasons as to why financial education is important. Making thoughtful and informed decisions about your finances is more important than ever. Several trends are converging that demonstrate the importance of financial literacy:
- More and more, the burden of making sound financial decisions is coming to rest on the shoulders of consumers. Many companies have shifted their retirement plans from traditional pension plans to those requiring employees to participate in, pay part of the cost for, and make investment decisions about.
- Social Security used to be seen as a major source, if not the major source, of retirement income. Now it serves more as a safety net that will provide enough only for survival, not enjoyment.
- We are living longer. This means that we must have accumulated more funds before retirement to cover living expenses over a longer time. Otherwise, we could become a burden for our families.
- The financial environment seems like it is changing faster. Bull markets, bear markets, rising interest rates, falling interest rates and the increased number of finance-related articles with conflicting views in the press can make creating and following a financial path difficult.
- There are more financial options. Hundreds of credit card options, several types of mortgages, different types of IRAs, and the ever-growing number of investment options further complicate financial decision making.
- There are more choices of financial services companies. Banks, credit unions, brokerage firms, insurance firms, credit card companies, mortgage companies, financial planners and others are all trying to get your business.
- The numbers themselves seem to have gotten larger. Costs and wages have generally continued to rise to the point where having an income or retirement nest egg that several years ago would have seemed luxurious, now just seems barely adequate