What is financial literacy, and why is it important?

From commercials to websites to TED talks, financial literacy is a hot topic. With rising inflation rates and a continued low interest rate environment, taking control of your finances can help you maximize the money you do have and help you plan for the future.

Financial literacy is the ability to understand and make use of a variety of financial information. It can include managing your money, budgeting and investing. It can also encompass understanding certain financial principles and concepts, such as the time value of money, compound interest, managing debt and financial planning. The goal of financial literacy is to establish control over your finances while also using your money as a tool to help provide you with a better quality of life.

Some key steps to attaining financial literacy include:

• Learning how to create a budget and tracking your spending so you can save for things that matter to you, such as a vacation or your child’s education
• Opening a bank account
• Establishing an emergency fund so you can recover from costly, unexpected expenses
• Understanding the importance of protecting your assets through insurance
• Working toward paying off debt
• Having a credit card and using it wisely
• Saving and investing for financial goals
• Planning for retirement

You should also learn how to protect yourself from potential fraud. It’s important to track your spending so you can keep a close eye on your finances and be alerted early on if fraud does occur. Many financial institutions can help with this by flagging your account with potential fraud. And additional protection from fraud protection services can aide in protecting assets that may be compromised by fraud or identity theft.

It is also important to grow and protect your credit score, which is a crucial component of your financial life. With a good or excellent credit score, you can qualify for lower interest rates on loans and credit cards. You may also receive offers for other financial products, which gives you the opportunity to choose the best option for you.

Educating yourself on these topics also involves setting and achieving financial goals, becoming aware of unethical/discriminatory financial practices and managing financial challenges that life throws your way. By becoming more financially literate, you can manage your money wisely and understand how to prevent and handle money issues as they arise – allowing you to pursue your financial goals with confidence.

Learn more about financial literacy and get started with these helpful resources:
Experian
Investopedia

The information provided here is for general informational purposes only, and should not be considered an individualized recommendation or personalized investment, tax or legal advice.