FINANCIAL LITERACY

 

Even though financial literacy is crucial to successful adulting, most college students are not financially literate. Those who are financially literate have proven to have a direct impact on their ability to make wise financial decisions. Plus, students who have some personal finance classes under their belts are much more likely to save money, budget wisely, and invest smarter. Perhaps we should re-evaluate how we are educating students on these important life aspects. Until that change happens, though, here are a few key concepts to work on in order to improve your financial literacy. Mastering these aspects would not always be easy but, with a little bit of practice, will benefit you for a lifetime. 

The Basics of Budgeting

Creating and maintaining a budget is one of the most basic aspects of staying on top of your finances. In this modern-day, it is easier than ever to create a budget with the help of websites and online applications. It does not matter if mathematics is not your strong suit - thanks to these user-friendly tools, everyone can get help with keeping their finances on track. And, when utilized properly, they will keep you in the know about where your money is actually going. Without following a budget, it is difficult to hold yourself accountable on where your money is coming from and what it is going toward, so mastering the basics of budgeting is where any financial novice should begin.

Understanding Interest Rates

While you may touch upon the concepts within a mathematics course, it is important to understand different aspects, like compound interest. Why? Not only can it help you save even more, but it can make the difference between borrowing a small amount and paying back much more than you need to for years to come. Understanding the ins and outs of interest can impact your finances more than you likely realize, so it is an important concept to gain a better understanding of early on in life.

Prioritizing Saving

Obviously, saving is an important aspect of maintaining a healthy financial situation. But, the majority of people do not prioritize this aspect as much as they should. It is easy to ignore things like retirement since it seems so far off in the future. Learning to save early on can help you gain the knowledge, practice, and set of skills you will utilize throughout your entire life. Beginners can start working on this concept in the simplest sense, like saving money for a higher-ticket item they desire. Working toward a goal is key here and you need to understand that there is a lot of value in paying yourself first - because the bills will always be there. Having peace of mind? Well, that comes with practice, diligence, and patience, all qualities you will develop when mastering your savings skill set.

Credit-Debt Cycle Traps

It is much easier to lose credit than gain it and many people do not realize how easy it is to ruin their credit - and how difficult it can be to regain credit – before it is too late. That is why it is crucial to provide knowledge on debt earlier than later. Credit can be an extremely useful tool – if it is managed correctly. Making rash decisions when you are young can end up costing you throughout adulthood so it is important to grasp the concepts and tools behind responsible credit practices as early on as possible.

Identity Theft Issues & Safety

In this modern-day and age, identity theft is more prevalent than ever. Since everything is digital and just about everyone has shopped online at one point or another, your financial information is more vulnerable to fraud. Understanding this concept, along with preventative measures, like password protection and limiting the amount of information shared online can be the key to maintaining safe accounts or, inversely, can lead to financial ruin. While it is not a foolproof science (people can be safe and things do still happen) it is important to safeguard your finances as best as possible to avoid the threats that exist. 

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