Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Financial literacy is the foundation of your relationship with money, and it is a lifelong journey of learning. The earlier you start, the better off you will be because education is the key to success when it comes to money.
Managing your money is a personal skill that benefits you throughout your life – and not one that everybody learns. With money coming in and going out, with due dates and finance charges and fees attached to invoices and bills and with the overall responsibility of making the right decisions about major purchases and investments consistently – it’s daunting.
You would think that because the stakes are so high that this would be a skill that gets taught in high school (or even before), but that’s not the case. Managing your own money requires a fundamental understanding of personal credit and a willingness to embrace personal responsibility. That is, you pay your bills in a timely manner and you don’t drown yourself in debt. You accept the fact that sometimes you have to sacrifice immediate demands and desires for long-term gain.
You budget. You save. You protect your savings. When you spend, you spend wisely. When you make big purchases, you do so for things that are worthwhile.
You understand the difference between good debt and bad debt. And you constantly pay attention to your overall portfolio — earnings, savings and investments. You also understand what you don’t know, and you ask for help when you need it.
To be financially literate means having the ability to not let money – or the lack of it – get in the way of your happiness as you work hard and build an American dream complete with a long and fulfilling retirement.