Definitions may vary slightly, but the term ‘financial literacy’ basically means having the knowledge, skills and confidence to make responsible financial decisions.. Financial literacy is an essential life skill.
Increasing your financial literacy skills can also help to get you out of debt if you’ve fallen in. Here’s how:
Understanding is the key to having success with anything in life, and wiping out debt is no different. Financial education helps you understand the central financial products that you’ll encounter during your life. These might include:
- Bank accounts
- Standard investments
- Retirement savings
- Credit cards, loans and similar products
Increasing your financial literacywill also help you to grasp and understand basic financial concepts like interest, compound interest, return on investment and diversification. When you’re able to understand the basics, getting yourself out of debt becomes that much easier.
Improves Financial Choices
It’s the choices you make that get you into debt trouble in the first place, but when you’re financially literate your choices improve. Things like your education, your job, when to buy a house, when to take out credit, when to start a family and how to plan for retirement can all get you in trouble if you’re not prepared ready to make those choices.
Sharpens Your Focus
The skills learned through financial education can help you sharpen your focus when it comes to debt repayment. When you understand the process and the concepts, you can determine how to tackle your debt so that you pay the least amount of interest and become debt-free sooner.
There are many different kinds of strategies that you can implement to deal with debt, and not all of them contain the ‘B’ word. Meeting with a credit counsellor is a great first step towards your financial education.
Helps You Roll with the Punches
Financial literacy means having knowledge and knowledge means that you don’t have to feel anxiety when things don’t go exactly according to plan. The economy is always changing, the unemployment rate rises and falls, investments waiver, it’s just all part of the process. Feeling knowledgeable and confident about your financial decisions financial literacy helps you to remain calm, act appropriately and weather the storms as they come along. Rather than make your debt situation worse in times of uncertainty, you’ll know how to respond to the situation in such a way that you’re always moving in the right direction.