Importance of Financial Literacy
An Introduction to Financial Literacy
We go to schools, colleges, universities to complete our educated and start earning our livelihood. We take up jobs, practise professions or start our own businesses so that we can earn money to make our living. But which of these institutions make us capable of managing our own hard-earned money? Probably a very few of them.
Our ability to effectively manage our money by drawing systematic budgets, paying off our debts, making buying and selling decisions and ultimately becoming financially self-sustainable is known as financial literacy.
Financial literacy is knowing the basic financial management principles and applying them in our day-to-day life.
Financial Literacy – What does it Involve?
From simple practices like keeping a track of our expenses and understanding the need to spend money if we like a product to striking a balance between the value of time saved and money lost, paying our taxes and filing of tax returns, finalizing the property deals, etc – everything becomes a part of financial literacy.
As human beings, we are not expected to know the nitty-gritty of financial management. But managing our own money in a way that it does not affect us and our family in a negative way is important. We certainly do not want to end up having a day with no money at hand and hunger in our stomach.
Why is Financial Literacy so Important?
Financial literacy can enable an individual to build up a budgetary guide to distinguish what he buys, what he spends, and what he owes. This subject additionally influences entrepreneurs, who incredibly add to financial development and strength of our economy.
Financial literacy helps people in becoming independent and self-sufficient. It empowers you with basic knowledge of investment options, financial markets, capital budgeting, etc.
Understanding your money mitigates the danger of facing a fraud-like situation. A few strategies are anything but difficult to accept, particularly when they’re originating from somebody who is by all accounts learned and planned. Basic knowledge of financial literacy will help people with foreseeing the risks and argue/justify with anyone learned and well-informed.
What should you read on / get informed about in Financial Literacy?
- Budgeting and techniques of budgeting
- Direct and indirect taxation system
- Direct tax slabs
- Income and expense tracking
- Loans and debt – EMI management
- Interest rate systems: fixed versus floating
- Business and organisational transaction studies
- Elementary Book-keeping and Accountancy
- Cash in-flow and out-flow Statements
- Investment & personal finance management
- Asset management:
- Business negotiation skills and techniques
- Make or buy decision-making
- Financial markets
- Capital structure – owner’s funds and borrowed funds
- Fundamentals of Risk Management
- Microeconomics and Macroeconomics fundamentals
While there are various media to learn about financial literacy, we recommend that you join a short-term, weekend programme which helps you get financially literate.