What is financial literacy? Well it’s basically an understanding of how money works in the world around us and it’s an essential skill for anyone who wants to be able to make their finances work for them. It involves getting to grips with earning or making money, how you can increase the money you have, and how to make effective decisions about your money so that your finances get healthier and healthier as the years go on. Whether you’re not doing that well with your finances and looking for a way to take control or you’re just seeking improvements, here are some tips for boosting your financial literacy.
1. Understand your employment benefits. As, for most people, your salary is your major income and your employment likely to be the principle source of benefits, such as pensions, health insurance and other savings this is the first place to start to get a better understanding of how your money works. Make sure you know everything about your employer based income, from the percentages you pay in tax and national insurance to the options you have for pension contributions and how these affect tax and savings. Most employers will be willing to provide plenty of literature and answer questions.
2. Do some basic research on financial products. You may not have a huge amount of spare cash to throw around but that doesn’t mean that you shouldn’t try to understand the options. If you don’t understand how pensions work, for example, – in relation to you and the financial markets – then you can easily find information online. Start with the basics – ISAs, savings accounts, pensions, interest free credit etc – and try to get a good idea of how everything fits together to create good looking finances overall.
3. Take a course. If you really want to improve your financial literacy to the point where you can start investing properly then it might be an idea to sign up for a course on the subject. There are plenty available and the financial outlay in paying for the instruction will serve you very well indeed when it comes to being able to make sound decisions to increase your wealth, however insubstantial it may be at the moment.
4. Be aware of the downfalls. One of the key elements of financial literacy is being able to understand financial difficulties and how to respond to them without making them worse. There are always risks involved with any area of finance but if you understand what the consequences of not meeting the terms of a debt agreement are, or you know how interest rates can work both in your favour and against you, then you will be in a much better position to make decisions that will positively influence your finances. There is plenty of information available online and from organizations like the moneyadviceservice.org.uk.
5. Don’t fall for the tricksters. To be financially literate you really need to understand that if something seems to good to be true then it probably is. Every financial product provides benefits to you and benefits to the lender or the entity offering that product. If you’re being offered a deal that seems to good to be true then research it, ask questions and make sure you’re not being scammed.
6. Read books! There are many financial self improvement books on how to improve your financial status. Some examples include the “Rich Dad, Poor Dad” series, Think and Grow Rich by Napoleon Hill, How to get Rich by Felix Dennis and more… See https://www.inc.com/geoffrey-james/top-10-personal-finance-books-of-all-time.html for a list of others.
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