You may have heard or come across the term financial literacy as you’ve learned how to navigate finance and make monetary decisions. But, what does Financial Literacy really mean? In its simplest form, financial literacy is the understanding of financial topics relating to personal finance, protection, borrowing, and investing. You know you’ve mastered financial literacy when you’re confident in making informed decisions about money!
As a part of my Spring Financial Cleaning series, it's important to take stock of where you are in the process and work towards getting yourself established with the correct level of financial literacy. Here are the five key principles of financial literacy determined by the Federal Financial Literacy and Education Commission. Having a thorough knowledge of these concepts provides to base to make sound financial decisions that lead to a secure financial future.
Earnings. It’s essential to have a detailed understanding of your entire compensation package. This includes your pay, as well as an annual bonus, health insurance, vacation days, and any other benefits that may factor into compensation.
Spending wisely and budgeting. A sound understanding of how to budget is the foundation for achieving your financial goals. Funding retirement, college tuition, even a vacation all require diligent saving over time. Your budget can tell you what you’ve earned, what you’re spending, and what’s left over each month! There are several budgeting strategies to try – see which one works for you!
Saving and investing. This includes creating an emergency fund and setting aside money for both short- and long-term goals.
Protecting yourself. Knowing what insurance to have to protect yourself and your financial situation.
Borrowing money and credit. Managing debt is an important aspect of a financial picture. Understanding the different types of debt, how to control your credit score, and keeping yourself from overwhelming debt are essential.
If you’d like to test your financial literacy knowledge, take this Financial Literacy Quiz! Don’t worry if you don’t score as high as you’d like. We’re always happy to dig into any areas you’d like to learn more about.
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We hope you feel like your own financial literacy has improved by working with our team. If there are any areas above that you would like to take a deeper dive into, please let us know.
Also, if you have friends and family that would find these resources beneficial, please don’t hesitate to send them along!
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Take My Financial Literacy Quiz!
April 06, 2021