Financial literacy is a set of skills that enables you to make smart financial decisions in life. It’s an essential step for leading a healthy personal life and achieving success at work or business.

When you are financially literate, you have knowledge of how to take care of your household budgets, understand how different types of loans work, plan for different situations in life such as retirement or home purchases, choose investment strategies, apply for jobs that are salary based versus commission-based, etc.

The more you know about personal finance, the easier it is to build wealth and budget for necessary purchases like college tuition, groceries, and automobiles.

You can become financially literate by taking some time to read up on common finance topics.

Make sure you compare credit card options before signing up with anyone in particular;

research different types of investments;

learn how to create a budget;

find out what an adjustable-rate mortgage is and how it works;

discover which types of loans have fixed interest rates versus variable interest rates;

understand the difference between good debt (mortgages and student loans) and bad debt (credit card debt).

 

What Is Financial Literacy and How Do I Get It? Share on X

 

Why Is Financial Literacy Important?

Financial literacy is important because it helps you understand how the system works to make informed decisions about your finances.

You’re better equipped to avoid scams and expensive financial products if you know interest rates and financing terms.

Being financially literate is important because it allows you to make informed decisions about your money.

It can help you decide whether or not to take out a loan, how much money to save for retirement, and what type of investments are best suited for your needs.

It helps be knowledgeable about interest rates on different financial products, including credit cards, mortgages, and savings accounts.

The more you know about personal finance, the more likely you will continue building wealth rather than living paycheck-to-paycheck.

 

What Can I Do To Improve My Financial Literacy?

The best way to improve your financial literacy is by taking the time to research the basics of personal finance. This includes comparing credit card options, understanding more about common investments, and reading about becoming a better saver. Read books that provide good advice on budgeting, saving money, and building wealth.

A general rule of thumb is that knowledge is power. The more you know about how the system works, the better equipped you can make informed decisions regarding your finances.

 

How to Become Financially Literate

Here are some practical ideas on how to become financially literate.

 

   Assess Your Current Knowledge Level

Once you see that knowledge is the only difference between someone who manages their money well and someone who doesn’t, it’s time to assess your current knowledge level. This can be done by asking yourself a few questions: How do you compare with others? Do you have more debt than 95% of people your age? What types of debt are you carrying? Do you know how much interest you pay on this debt each year?

 

  Find Personal Role Models

Many successful entrepreneurs once struggled with personal finance management themselves. Think Steve Jobs – what would he have been without his business partner, Steve Wozniak? Or Henry Ford – what would he have been without Thomas Edison’s commercially viable light bulb invention?

When it comes to personal financial management, every successful person has a personal role model. Who is your own success story?

 

Websites such as Forbes and Yahoo Finance are invaluable sources of information on how to be financially literate. You can learn from the experiences of others who have gone through what you’re going through now.

In addition, sites like Life Hacker offer practical advice on life skills that help us manage our lives more efficiently. From tax preparation tips to car shopping advice, you can find practically anything online these days – including how to be financially literate.

 

   Open a Brokerage Account and Invest in a Company

This may sound counter to your goal of being financially literate, but it’s a great idea. You can go one step beyond reading self-help financial advice and apply these newfound skills in the real world. It’s time to invest in something. Just open up an online brokerage account and buy shares in companies you want to learn more about.

 

   Take Advantage of Free Classes and Seminars

If you’re in high school, then you’re probably learning about financial literacy already. High schools part of the Federal Financial Literacy and Education Commission offer free educational seminars on personal finance. Many colleges also offer classes related to personal financial activities, such as managing student loans or saving money for retirement.

 

  Read Books by Top Financial Experts

There is no shortage of top-notch books on the topic of personal finance management. The Wealthy Barber by David Chilton is one example; this book has sold over 2 million copies worldwide since 1981. Another great choice would be How to Manage Your Money When You Don’t Have Any by Michael Carlson (not an expert, but certainly an entertaining author). Many more books are available at your local library, so don’t hesitate to peruse the shelves for a book that’s just right for your financial literacy level.

 

Learn From Your Mistakes and Failures

Everyone makes mistakes when it comes to managing their money – some bigger than others. But if you’ve spent years buried under credit card debt or spending more than you make, this doesn’t mean that you can never improve your situation.

After all, would Steve Jobs still be such an inspiring figure had he not come back from failure? The key is to learn from and own up to mistakes and failures and not repeat them in the future. So what did we forget? How do we improve our financial management skills? What kinds of resources are available for us to use?

Use a budgeting app – if you have a smartphone, there is an app for that.

Figure out your net worth by compiling all assets and liabilities in one place.

Get a financial advisor – many online brokerage firms offer free consultations with financial advisors, so it doesn’t hurt to reach out.

 

Conclusion

While there are ways of obtaining financial literacy, the best way to obtain good financial literacy is from sources. This can include education at home, school, and college and learn from other people in a mentor-type relationship.

Financial literacy isn’t something you learn overnight or even in a semester. It takes practice and time to develop good money management skills and habits that will stay with you through adulthood. By working on these things now, you might find yourself going into adult life with better financial health than many others around you.