The Financial Industry Regulatory Authority (FINRA) gives a test containing five questions as part of its National Financial Capability Survey at yearly intervals to assess customers' understanding of interest, compounding, inflation, diversification, and bond prices. About 34 percent of those who took the most recent test got four out of five questions right, implying that the fundamental economic and financial concepts that fuel these issues are predominant.
FINRA also reported in 2020 that about 66 percent of the American population is considered financially illiterate. In a new survey by the National Endowment for Financial Education (NEFE), 88 percent of Americans believe the Covid-19 pandemic is causing them financial stress. These challenges are a compelling cause for us all to develop or improve our financial literacy. This article will delve into what financial literacy entails and why it is so essential to all.
Now, what Is Financial Literacy? Financial literacy is the comprehensive knowledge of economic components, and skill sets such as budget planning, investing, leveraging, taxes, and personal finance management — elements that are important in our daily lives. There is a broad range of information available to help us see the possible costs of our actions, and taking the time to learn these principles and others will help us achieve financial stability. Being financially illiterate refers to the lack of such skills.
Since financial literacy starts with your first dealings with money, it is a lifelong process with both positive and negative outcomes. You will learn financial literacy by studying personal finance educational material and also through real-life experiences. Financial professional counseling is another example of such a measure. Understanding how money works, setting and reaching financial objectives, and dealing with critical financial problems are all parts of financial education. Some critical elements of financial literacy that must be studied and understood are highlighted below.
Where can you learn Financial Literacy? Aside from gaining insights from physical conversations with people and day-to-day experience, there are various resources and online courses, which extensively talk about the earlier mentioned skills, available to help people improve their financial literacy.
Conclusively, any increase in financial literacy would have a positive influence on people's ability to plan for their future. The latest trends make it much more important for customers to understand simple finances because they are being forced to carry more from the burden of investments in their retirement savings while also trying to decode more complicated investment opportunities. Financial literacy is not easy to achieve, but once achieved, it will greatly reduce life's burdens.
August 13, 2022
August 10, 2022