What is Financial Literacy?
Financial literacy refers to the knowledge and understanding of various financial products. It helps individuals manage their money, personal finances, investment, and tax planning. Its primary purpose is safeguarding individuals from financial frauds and scams.
It is crucial for the realization of long-term goals—a child’s higher education, buying a house, or establishing a business. It highlights emergency funds, retirement funds, insurance, and estate planning. Educating one individual creates a chain reaction—creating awareness among friends, family, colleagues, neighbors, clients, etc.
Understanding Financial Literacy
Financial literacy can safeguard individuals from dubious schemes. Financial decisions are an indispensable part of everyday life; one might as well learn about them. Everyone needs basic finance know-how—to differentiate between needs and wants. With awareness comes planning; once individuals narrow down on a financial goal, they can start saving.
At the onset of one’s career, a person can take more risks. Different investment options cater to a variety of needs, but the investor should be aware of them. Warren Buffet once said, “If you buy things you do not need, soon you will have to sell things you need.”
Financial literacy opens the doors to passive income, budget creation, reduced spending strategies, diligent investments, and credit risk minimization. Financially literate individuals avoid monetary losses and attain financial objectives that would otherwise be impossible. Preconceived notions of an individual are the biggest challenge—they stifle learning. People are resistant to new ideas and opportunities, this hinders financial education.