What Is Financial Literacy?
Financial literacy relates to the ability to understand and effectively convey various financial skills, including personal financial management, budgeting, and investments. In this blog post, we answer the small but fundamental frequently asked questions that relate to financial literacy as a concept and a practice
The topic of financial literacy should not be uncomfortable, here are some commonly asked questions and their answers. Let’s get you started.
What is financial literacy?
Financial literacy is the understanding and management of personal finances effectively. This process requires one to know financial concepts, such as budgeting, saving, investing, and credit management, and the skills to apply these concepts to make informed financial decisions.
What is a credit score?
A credit score is a numerical representation of your credit standing. When calculated, your credit history, including your payment history, credit use, length of credit history, and types of credit used are considered. A higher credit score indicates that you are more likely to repay your debts on time.
What is a budget?
A budget is a financial plan that helps account for your income and spending over a specified period. It assists with tracking your spending, prioritizing your expenses, and avoiding overspending. A budget can help you achieve your financial goals, and that’s why it is an important factor in financial literacy.
Now that we have looked at and answered your basics, what can you do to improve or start practicing financial literacy? We have a few starting points for you below.
Create a budget
A budget is a plan that helps you track your income and expenses. It can help you identify areas where you can cut back on spending and save more money. You can use a spreadsheet or a budgeting app to create a budget that works for you.
Pay off high interest debt early
This helps you track your income and expenses by identifying where you can or need to cut costs or spend less money. There are many guidelines to creating your own budget available for you.
Start saving for retirement early
The earlier you start investing or saving for your retirement, the more interest you accumulate. This helps make more money out of not just the money you’re currently working for, but also the money you’re currently saving.
PROTIP:
Esurity Financial Services offers customers a wide range of consumer education programs that focus on financial literacy. By offering this service, we hope to enable individuals, communities and organizations to better manage their financial obligations in their personal and professional capacity. Contact us today to learn more about our financial education program.
Based on the above mentioned financial literacy FAQs and their answers, financial literacy is an essential skill for everyone. When we understand financial concepts and practice them as habits, we can make informed financial decisions while also avoiding debt and achieving personal financial goals. Follow Esurity Financial Services for more beginner friendly, money wise conversations.
