Learning how to manage finances wisely early on is a prudent decision. Financial literacy is as important as teaching children alphabets or numbers. It helps in learning personal finance principles and practicing good money habits. Financial literacy improves your money management skills, which involves understanding money and developing budgeting, saving, and investing abilities.
With a little advice, you can confidently manage your money and prepare for your future. Start today and learn what we need to make fact-based money choices.
What is financial literacy?
Financial literacy is nothing but financial education. It teaches you skills such as money management, financial planning and investing. It includes teaching financial concepts, such as compound interest, debt management, maturity value, etc.
Financial literacy helps an individual to be organised and make wise monetary decisions to become financially independent. Developing financial literacy requires repeated budgeting, tracking spends, paying off debts, and planning for your retirement.
Importance of financial literacy
Basic financial literacy is the ability to make informed financial choices. Financial planning, budgeting, saving, investing, managing debt, and buying an emergency fund are crucial life skills. Think of it as a lifelong financial roadmap.
Money management can help an individual to avoid overspending and helps in debt management. You'll have lesser money worries if you have a strong financial schedule. Financial literacy determines one's ability to prepare for the future, such as purchasing a house, saving for retirement, or starting a company.
It is a good idea to start financial literacy training early. Financial education is essential for managing your first salary, paying off college debts, and saving for the future.
Getting access to financial education at an early age can help you become financially secure. Financial illiteracy may lead to several problems, including accumulating debt. Bad spending or lack of long-term planning may create this, which might lead to negative credit score, bankruptcy, and other issues.
Personal finance basics
In personal finance, being financially literate means being able to make your own money related. You can track your money by keeping a tab on what you spend and earn. Tools such as investment platforms or budgeting apps will help you save and grow your money. Whether you are saving for buying a home, planning for a vacation, donating for charity, preparing for retirement, or supporting your family, it's important to set clear financial goals and work towards them. Personal finance involves setting and reaching these goals, and it covers areas like banking, financial planning, debt management, building a good credit score, and investing.
Benefits of Financial Literacy
Financial literacy serves as a safeguard against detrimental financial mistakes and prepares individuals for emergencies. It empowers individuals to reach their financial goals, instills confidence in making life-changing decisions, and fosters financial preparedness for unforeseen circumstances.
Strategies to improve financial literacy skills
Adopting excellent money habits is always possible regardless of your life or finances.
- Create a budget
You may use a planner, or Excel sheet to monitor your monthly income and expenses. Your budget should include income (salary, assets, and alimony), fixed expenditures (mortgage or rent, utility bills, and loan payments), personal costs (dining out, shopping, and travelling), and savings.
- Pay bills promptly
Maintain a monthly bill payment schedule and pay on time. Consider if your bank or bill-paying software allows frequent debits. Set up email, phone, or text payment notes for emergency notifications.
- Control your debts
Budgeting may help you pay off debt by reducing spending and increasing payments. Plan your debt repayment. Pay down the highest-interest debt first. This may assist you in repaying debt. If your debt is too high, speak to your creditors about renegotiating your payments, consolidating your obligations, or recovering debt.
Axis Bank aims to empower individuals by offering effective debt management solutions to assist individuals and businesses in managing their debt effectively. Axis Bank's debt solutions include products and services such as bonds/debentures/warrants, preference shares, commercial papers, securitised products including pass through certificates (PTC), Infrastructure investment trusts and Real Estate Investment trusts.
Also Read: Top 10 financial advice on buying a car
Conclusion
Although mastering financial literacy may seem daunting, every journey begins with a single step. Implementing small changes like budgeting, debt repayment, or savings can yield significant financial benefits. Investing in financial education is an investment in oneself, with the potential to reduce stress, make informed decisions, and achieve financial goals.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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