Is your financial literacy up to scratch? Many people don’t think about it until they’re faced with a financial puzzle to work through, whether it’s applying for a mortgage, picking a savings account, or deciding whether to save for retirement.
But financial health literacy is so important to the rest of your life. Read on to find out why.
What is financial health literacy?
Financial health literacy equips you with the knowledge and tools to navigate financial problems and improve your overall financial standing.
It’s all about knowing and being familiar with financial terminology, the best practices, things to avoid, and being comfortable talking about and making decisions about your financial future.
Why is it so important?
Finances are an important and unavoidable topic in our lives. When we become adults, we have to think about things like budgeting, saving, retirement, mortgages, rent, credit cards, car finance, and much more.
So many people fall into money troubles and struggle to get out. While many of them may be unavoidable, financial literacy can help soften the blow of a sudden expense or problem.
The more knowledge you have about these things, the better decisions you will make about them. Making the wrong decisions can leave you with unmanageable debt, unsustainable budgets, or empty retirement accounts that come back to bite you further down the line.
Financial literacy means:
You’re better prepared
With better financial literacy, you can better prepare for everyday costs and emergencies. Someone with good financial literacy will attempt to put aside money for emergencies, for example, sudden medical bills or a car repair.
You can spot bad deals
Deals in the modern world surround us, but someone with good financial literacy will be able to spot the good from the bad. For example, advertisements for loans that look too good to be true usually are. Reading the fine print can help you avoid getting into bad deals or debt.
You have less money stress
Money worries are one of the top causes of stress, so having better money management means reducing stress. You’ll be able to sleep better at night without huge mountains of debt or poor financial decisions hanging over your head.
How to build your financial health literacy
So, how do you improve your financial literacy? Even if you have made money mistakes in the past, it’s not too late to learn. There are a few simple ways you can improve your knowledge.
1. Take advantage of free information online
The internet is packed full of free resources, from blog articles to videos to downloadable eBooks, and podcasts. Everything you need to know is just a Google search away.
If you want to know the best savings account, credit card, mortgage lender, or pension provider, you can check that out online. Our Thinkflow blog has plenty of budgeting tips as well!
2. Ask for advice
Many people avoid talking about money, but you can learn a lot by talking to those who are more money savvy than you are. It doesn’t have to be a formal lesson; you can simply slip it into the conversation.
For example, ask for their opinion on retirement accounts or savings accounts. Friends or family members will usually be glad to help and will appreciate you asking their advice.
3. Look at your own spending
Sometimes the best lessons come from within. If you know you have made financial mistakes in the past, this is the best teacher. Rather than try to forget what happened, take some time to reflect. Where did you go wrong? How can you stop it from happening?
For example, if you have not been able to stick to your budget, ask yourself why? Was it because you were overspending on non-essentials? Were you underestimating costs? Do you need to start looking for a better-paying job?
4. Take it one step at a time
Learning more about finances doesn’t have to involve a classroom or a semester worth of learning. Start small; pick one thing to focus on today.
You could decide that this week, you want to think about financial goals. Maybe you’re planning a vacation. If so, look into the best ways to set financial goals. Calculate how much you need to save each month to achieve your goal by a certain date? Look at the best savings accounts and learn about annual interest rates while you’re at it.
Maybe next week think about car finance if you’re thinking of getting a new car or refinancing your current car loan. Learn about interest rates, fuel efficiency, insurance, and so on.
Learning about finances doesn’t have to be serious or even too difficult. Step by step, you can build your financial literacy, prepare and plan ahead, and avoid bad financial decisions.
Thinkflow is here to help you monitor your cash flow so you can make better informed financial decisions. Get started today!