Everybody has heard of the saying 'knowledge is power'. But do we really know what it means? Well, for starters it means that if you have more knowledge about anything then you are in a better position to make decisions.
In fact, the more knowledge you have about something, the better decisions you will be able to make on that particular subject. This applies to everything from personal finances to relationships and even business, especially when they are tied into specific goals or objectives.
For example: If someone knows they want to retire early then they need access to specific information that can help them achieve this goal with minimal risk involved (or at least less risk than if they were just guessing).
However; if someone doesn't understand how compound interest works then there is no way they could ever plan properly for their retirement because compound interest can play such an important role in determining how long it will take for their savings accounts/investments grow into something substantial enough for them not have to work anymore.
What is Financial literacy?
To my understanding, financial literacy is the knowledge and skills that people need to make sound financial decisions. This includes both knowledge of personal finance, which can be acquired through formal education or self-study; and a set of skills to apply this knowledge for achieving specific financial goals.A person's level of financial literacy may affect their ability to manage different types of assets, liabilities, income streams and expenses in order to achieve their short-term and long-term goals. In addition, it also affects directly or indirectly the amount they save for retirement or emergencies.
Reasons We Lack Financial Knowledge
There are quite some factors that contribute to why people lack financial knowledge. They include but are not limited to;- We are not taught to prioritize our finances.
- We are not taught to save.
- Parents don't talk about money.
- Lack of financial education in schools.
- We don't know how to handle debt or make it a priority, but we do spend money on things we don't need and give up other things we do need because of this lack of knowledge and understanding of the value of money.
We also have very little knowledge or guidance when it comes to investing our hard-earned dollars or managing debt—a topic that can be a bit complicated for even those who are financially savvy. Just google how to manage debt and see the different results you get.
Consequences Of Lack Of Financial Knowledge
The consequences of lack of financial knowledge are far-reaching and can have a detrimental effect on our personal and professional life. When we don't know how to manage our money, we will most likely make poor decisions that end up costing us more than they should have.For example:Thinking that getting a credit card means buying whatever item catches your eye without worrying about how much it costs because “there's always room in my budget for something new!” This way of thinking isn't uncommon among people who lack financial literacy—and it can land them in deep water if they aren't careful about their spending habits (or don't consult experts before taking out a loan).
Ways To Acquire Financial Knowledge
Read books on personal finance. This is the most obvious way to acquire financial knowledge, as there are many of them available. You can find books at the local bookstore or online websites. There’s a reason why Robert Kiyosaki’s Rich Dad Poor Dad is a classic among personal finance books. It shows us the basic tenets of personal finance and the mindset that one should have regarding money.Read financial websites. This is also a good source to acquire financial knowledge, looking at it from the perspective of different individuals. It’s not like I’m bias or anything but leofinance.io is a great source to acquire financial knowledge. Based on personal experience, my financial knowledge had a boost and broadens in scope ever since I started engaging in the community.
If reading is not your thing or doesn’t sound visually appealing, you can learn through watching financial videos. Youtube is the main hub but any other reliable place will do. There’s a lot of information on the Internet. You may already know that there are many ways to get financial advice; however, some of it is good and some isn't so great.
Conclusion
Acquiring some basic and fundamental knowledge of personal finance is important for everyone. It's necessary to have a solid grasp of financial literacy because it will make your financial life a whole lot better.Financial literacy is essential and important. It can help you make informed decisions regarding the allocation of your money and investment choices. It also helps us manage our finances in a better way.
Thanks For Reading!
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