Financial literacy refers to the ability to manage debt, credit, finances and knowing which will enable one to make responsible financial decisions. Financial literacy will affect the daily issues any family will make when to make decisions such as ensure they retirement income, funding the education of their kids, buying a home and make a balanced budget.
Financial literacy level will vary depending on the income and education levels. However, experts have revealed that less educated and lower-income consumers tend to less financial literate, although not all of them.
Financial independence is very important due to the following reasons.
Budgeting
If you wish to get into financial literacy, you should start by making a list of your earnings and the total expenditure every month. When it comes to good budgeting you should be able to avoid all unnecessary expenditure so that you can increase your savings. Some of the expenses that you can avoid is buying expensive shoes, bags, cars, clothes and gadgets. Budgeting will enable you to know how you spend your money and what percentage of your earnings that you can set aside for savings.
Assists us in preparing well during emergency times
In life, it’s normal for us to encounter emergencies where we will need a huge amount of money to survive. During such times, if you are financially literate, you will not be exposed to troubles of borrowing which can lead to even severe problems. At the time you may find it hard to get someone to assist with the kind of financial help which you may need which can worsen your situation.
It will enlighten us in creating more income streams and investing
Some of the results of financial literacy are that you will be able to look for a way of generating more income besides your salary such as investing in stocks. When you rely on more than once source of income, you will be able to meet many of your needs without struggling. You will also be confident that you can survive in case you face a financial crisis.
It will save you from getting into debt
If you acquire a lot of debt you expose yourself into trouble. However financial literacy can assist you to determine the amount of loan which you can afford, especially when you have many bills to cater for. Literacy can also teach you so that you can prepare on how you are going to fund the education of your children, hospital bills, medical bills and other future needs without borrowing money.
It will enable you to impart your knowledge to the younger generations
Being financially literate will enable you to secure the future of the next generation. You can easily teach them on how they can budget and save for unforeseen circumstances in future. Your kids can also realize how you struggle in meeting all your needs. Assisting them to be aware of the benefits of financial literacy will instil discipline so that they can respect you. This can also teach them that they should start being financially independent even when they are young.