What Is Financial Literacy?
Financial literacy is having a self-assured understanding of concepts like saving, investing, and debt that results in a sense of overall financial security and self-trust. The ability to make educated financial decisions is referred to as financial literacy.
Less than a third of the population of India are financially literate. Many lack access to banks or microfinance, but might resort to loan sharks, exposing them to cycles of debt. The fact that financial literacy in India lags behind that in many other nations is alarming. A global survey found that India has about 20% of the world’s population, but only 24% of Indians are familiar with basic financial concepts!
First Ever Social Network To Help Members Save Money And Support One Another Financially.
Teaching people financial literacy aims to help them better manage their money by strengthening their understanding of fundamental financial concepts. Financial literacy aims to give you a sense of control over your finances and to use money as a tool to freely make choices that make your life more enjoyable.
When you are financially literate, you know how to use your income to achieve multiple objectives at the same time, including savings, debt repayment, an emergency fund, and ongoing expenses.
How Important Is Financial Literacy?
People who are financially literate not only have a better chance of handling the inevitable ups and downs of their financial lives by understanding how to prevent and manage issues as they arise, but they also manage their money with greater confidence.
This could mean keeping a close eye on your bank and credit card accounts so you can spot potential fraud as soon as possible, or it could mean being able to quickly recover from a costly auto repair because you saved a lot of money. On the other hand, individuals may be able to save more effectively with financial literacy for things that are important to them, such as a vacation or their child’s college education.
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Financial literacy can improve your life in the following ways:
Know how much you spend and earn.
One important step in developing financial literacy is to create a budget to truly understand your income and expenses. You can keep track of your spending and regularly review your spending plan once you have a budget. Choose the budgeting strategy that you are most likely to stick to among the many available options, such as the 50/30/20 plans.
Read: How To Plan A Home Budget And Achieve Your Goals: 7 Steps
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Repay and stay out of debt.
Paying off credit card balances each month to avoid interest charges is another way to save money over time, as is searching for the lowest interest rates when comparing loan terms. Financial literacy can help you choose the best ways to get out of debt if you already have debt.
Avoid getting into debt.
Creating an emergency savings account is an essential step in avoiding debt accumulation. A saver with sound financial knowledge knows how much to set aside—ideally, three to six months’ worth of expenses—and tries to maintain that amount at all times.
Strive for a comfortable retirement.
Save for retirement simultaneously, regardless of your other short-term objectives. You will have a better understanding of how to save money, what kind of retirement you want, and how to get there once you have become financially literate.
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How To Improve Financial Literacy
Below are a few ideas that need to be worked on in order to improve financial literacy.
The Basics of Budgeting
One of the most fundamental steps of financial literacy is creating and sticking to a budget. With the help of websites and apps, creating a budget is now easier than ever. These apps will keep you informed about where your money is actually going when used correctly.
If you don’t stick to a budget, it’s hard to keep track of where your money is coming from and what you’re spending it on. Anyone who is new to finances should start by learning how to budget.
Understanding Interest Rates
Although a mathematics course may touch on some of the concepts, it is essential to comprehend other aspects, such as compound interest. Why? It can not only help you save even more, but it can also make the difference between taking out a small loan and repaying much more than you need to for years.
Understanding the ins and outs of interest can have a bigger impact on your finances than you might think, so it’s important to learn about it early.
Saving money is obviously essential to maintaining a healthy financial situation. However, majority of people place less importance on this aspect than they ought to. Because it seems so far off, things like retirement are easy to ignore.
You can gain the knowledge, practice, and set of skills you’ll use throughout your life by learning to save early.
The simplest way for beginners to begin working on this idea is by saving money for a desired higher-price item. You need to understand that setting a goal is important here, and that paying yourself first is important because bills will always come up. All that it requires practice, perseverance, and diligence, all of which you will acquire as you master your savings skill set.
Set a small savings goal for yourself to start. Maybe it’s Rs 100 a week. Whatever you decide, increase the amount you save per week once your initial goal is easy and achievable.
It’s also smart to keep a “rainy day fund” in a savings account. This is money that you can dip into when the air conditioning goes out in your car or you face a sudden medical emergency.
Read: How Saving Money Becomes Easy With The Help of Community?
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The Power of Saving
We all have financial goals we want to achieve, whether it’s paying off debt, saving for a down payment on a home, or preparing for retirement. The key to achieving these goals is to manage our finances wisely and consistently over time. Saving money can be tough on your own, but with the support of a community, it becomes a lot easier.
Money Club is the first ever social community that is committed to help others improve their financial lives. It is dedicated to helping members save money and support one another financially. Through the unique network of verified individuals, Money Club provides a secure and reliable platform for members to save and borrow money.
Money Club is not only a platform to provide you a systematic saving scheme, but we make sure that you have an easy access to your savings and the flexibility to borrow much larger sums, when you need it the most.
We use high-end technology in order to bring basic financial services (saving, borrowing and investing) to a segment of the Bharat that was largely unbanked till date. For millions of customers, we provide a safety net in times of crisis.
You can also join its Facebook group Paiso ka Saathi first ever social network dedicated to helping members earn money, save money and support one another financially.
Read: Know Your Money Club platform Journey On The Money Club App
In the end, your commitment to financial literacy will best result in increased self-confidence. You can be sure that you won’t end up in debt or invest with too much risk if you have the information you need to make well-informed choices. You can then establish and pursue the financial objectives that best support your life’s vision of happiness.