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Financial Literacy – A step by step guide for young adults
What is financial literacy and why is it so important? This blog introduces financial literacy to young adults. It breaks down the subject into bite-size (or micro) articles that focus on a specific topic of financial literacy.
1. Introduction to Financial Literacy
Money is an important instrument in life. Wise men say that money is not the most important thing in life and they might be true. However, money is actually the most important instrument when it comes to solving problems that require an economic exchange of value. Without money or the enough of it might restrict you from living a fuller life. A sense of maturity is required to understand the true value of money. Money, in and by itself, is not very interesting or spectacular, but what money can do for you is really what is important. Money gives you freedom and choices at your disposal.
Today’s young adults face an overwhelming number of complex financial decisions. However, many are unprepared to make informed financial choices as they move into adulthood and many young adults cannot answer basic financial questions. Every young person, which includes high school students, college students, young working adults must inculcate financial literacy and hence improve their financial capacity. This is one of the reasons why now most of the developed countries’ higher education are including financial literacy as one of the core fundamental subjects in early stages of tertiary education.
Financial literacy allows you to understand the basic financial concepts of money and how to manage money for meeting your financial needs. In short, it provides directions towards personal finance. This might sound simpler. But in actual terms, it is not. Managing money is one of the most difficult tasks that you will face throughout your adult file.
Believe it or not, it can be easier and quicker to destroy credit than to build it. Making mistakes related to personal budgeting can ruin your credit and set you on a downward financial spiral for years. That’s why it’s important for young adults to develop basic financial skills as a foundation before gaining financial independence.
Financial literacy is the knowledge and understanding of how money works It provides critical skills and know-how on how to make informed, effective financial decisions based on available resources and circumstances. The consequences of not learning to manage and understand basic financial concepts can severely affect the quality of life, leading to missed savings or worse yet, inadequate emergency funds, high debt, financial loss, bankruptcy and unfulfilled life goals.
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