What is Financial Literacy? – Components of Financial Literacy

Financial Literacy is the ability to use knowledge and skills to manage financial resources like Investing, taxation, and borrowing should be done efficiently for long-term financial well-being. The absence of such skills is being referred to as Financially Illiterate.

What is Financial Literacy
What is Financial Literacy

What is Financial Literacy? – Components of Financial Literacy

Financial Literacy has different components that make you gain knowledge if you are ready to learn. These are components of Financial Literacy:

  • Taxation: When you have knowledge about the different types of taxation and how they can impact your income net. The income tax rate allows economic stability and it can increase your finance through income management.
  • Budgeting: A budget is a way to pay off debts and leave money separately for saving and other investments you can Gain. Creating the right balance with the use of money, makes you allocate your income.
  • Investing: investment components make you take a good financial decision that will increase inflow and income.
  • Borrowing: if your financial literacy increases it will provide borrowing guidelines and reduce long-term financial stress. Before borrowing and to ensure that it’s done effectively, you must understand the compound interest, payment period, interest rate and loan is crucial.
  • Individual financial Management: The most important individual financial management includes all the components listed above and it guarantees an increase in your financial literacy.

Importance of Financial Literacy

Learning financial literacy is one of the best things you can do to ensure financial stability. Below is some importance of Financial Literacy:

  • Credit card levels are at a high record of 1.04 trillion.
  • On average, credit cards owners owns at Least four cards each
  • Americans are approximately 12.52 trillion in Dept.
  • 78% of Americans live paycheck to paycheck.
  • More than one hundred and eighty-nine (189) Million of Americans have a credit card.

Benefits Of Financial Literacy

When you are well skilled it brings a lot of benefits and improves your standards of living in financial ways. Below are the benefits of being financially literate.

  • It reduces financial stress and anxiety.
  • It stimulates the ability to reach financial goals.
  • It helps you to make better financial decisions.
  • Your Creation of a structured budget is effective.
  • It reduces expenses through better regulation.
  • It makes you invest for your future

Taking steps of becoming financially Literate is a very good decision or task that makes you financially strong and helps you to achieve financial goals.

Tools to Increase Financial Literacy

There are tools and online modules that can increase your financial literacy. They are listed below;

  • MoneyWi$e: it provides free financial education.
  • Incharge: it provides E-book for educational purposes online and empowers customers through individual financial management.
  • EconEdLink: it’s an online financial class or lesson for k_ 12 students.
  • Money Smart: it’s a free tool for financial literacy like lesson plans and podcasts.

If you wish to grow your financial literacy, follow the tools above to acquire financial knowledge.

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