Do you know one major classification of any society is that of the learned and unlearned, and this forms the basis for almost every other societal classification?
Just as it is impossible to navigate an ever growing and industrializing society without being literate – the ability to read, write and comprehend, so it is not possible to fully participate in today’s world without being financially literate.
The financial market and space have grown increasingly complex as ideation, innovation and invention of new systems, models and technologies of interacting with our finances as individuals have been introduced. These advanced and more sophisticated financial products are being developed as time demands; and yes, they offer better opportunities with solutions or services as compared to the past forms of doing things on our finances. This leaves one with an urge to be technically updated in all spheres as development is rapid and much more with financial development; thus financial literacy.
Do you know what financial literacy means?
According to the Journal of economic literature, financial Literacy refers to the ability to process economic information, understand basic financial concepts, make informed financial decisions and manage one’s financial resources.
It refers to understanding basic financial concepts, including interest compounding, inflation, risk diversification, cashflow forecasting, basic expense and sales statement, profit & loss statement, profitable savings techniques; and to more advanced concepts like stocks and bonds; basic asset pricing, the working of mutual funds and general investment tools.
As individual humans, interaction with money is inevitable and so is making decisions about our personal finances. Generally, our wellbeing depends on the decisions made (no, not chance or luck).
Your education is incomplete without know-how on how to manage your proceeds.
The concern about financial literacy
You know what? Financial literacy is quite a serious matter and there has been numerous investigations into factors surrounding it’s opposite (Illiteracy), as well as possible effects of both literacy and illiteracy on individuals and on macroeconomics.
There exists a strong correlation between financial literacy and financial attitudes or behaviour and this can be used to measure individual financial wellbeing and measure economic health as well. The economic health of a place is subject to existing literacy level, and it has been interestingly figured out that consumers often overestimate how much they know, which only brings more worry as technology has made financial markets more sophisticated.
Following the global move to deepen individual inclusion into the national finance structure and the growing availability of great number of financial products through technology, now than ever there is need for financial awareness and knowledge to enable you to be able to navigate the fast moving planes of the financial market as well understand and utilize the new financial products at your disposal.
It has been researched that, no matter the income level, illiteracy is signaled to be one of the main reasons behind savings and investing problems, being a victim of predatory lending, fraud, and high-interest rates. We cannot but buttress on how important this is, as our schools never teach this. Financial literacy is inevitable for anyone who aspires to do fine with respect to his or her finances.
Why you must be financially literate?
Technology has deepened the Do It Yourself (DIY) approach of doing things and still very focused around it, allowing individuals to get things done with little or no stress. Why would you let your small side hustle, no matter how small, run without proper financial templates?
Financial decisions should never be haphazard; they should be based on clearly defined knowledge, based on specifically spelt out plan or goals, based on a well prepared (refined) action list.
More important than ever, making informed financial decision is important. A sound knowledge is necessary to make financially responsible decisions—decisions that are integral to our everyday lives. Take the below;
3 reasons to take this as serious as your blood:
- Better decision-making: Now that you know that more than ever before, you have more financial options at your disposal, decision making cannot be any easy than a prior know-how of breaking the economic value of goods not neglecting quality. Being financially literate will afford you the understanding of financial implication – choice among different products offering with varying interest rates and maturities
- Navigating financial environment of every market: Like it was said earlier the financial market is one of the places where things happens fast, everything keeps revolving, New policies roll in from time to time as support structure for the market. The quickly changing environment created by technological advances such as electronic trading makes the financial markets swifter and as well more volatile. Financial environment can become increasing difficult without being literate; the ability to process economic information is required in breaking into to new financial environments.
- Consumer Protection: Over the years there have been numerous counts of consumer violation which persists till date, and who are these consumers? You are definitely one, right? Several rules have been put in place to protect consumers from violations of their rights. Unauthorized charges, certain types of discrimination by lenders in deciding to whom to grant credit and identity theft are simple violations the law prohibits. Only literates equipped are able to stand up to the challenge against any form of violation. Resolutions happens through as simple as a good complaint letter, small claims court, consumer protection agencies. It is alarming to share that users are not even able a draft complaints letter, some even choose bearing the loss of unauthorized charges counting it minimal compared putting oneself to what they call “undue stress”.
What other reasons do you consider of importance on why financial literacy should be treated as a top priority in our lives?
Share with us in the comment box below!!!