Financial literacy is a critically important skill that greatly increases an individual’s ability to live an economically fulfilling life. However, despite the importance of the four pillars of financial literacy in the modern world, even the basics of financial literacy are still not being taught in schools.
The online loan provider Wonga recently published some financial literacy info regarding the fundamentals of debt, saving, budgeting and investing to help people improve their financial literacy. We thought we’d built on that with information about the steps you can take yourself to increase your knowledge.
- Talk about money
In many families and social circles, money is a taboo subject, so conversations about how to manage it simply don’t take place. In too many families, the only time children hear about money is when it causes arguments at home, which begins a harmful cycle of negative associations with money and financial management.
Having open and frank conversations about money at home can help to improve the financial literacy of children and adults alike. The fundamentals of earning, saving and spending money should all be discussed, with the importance of making the most of what you have a vital skill to pass on.
- Understand which sources of information are reliable
One of the biggest problems people have when making financial decisions is determining which are reliable and unreliable sources of information. Misinformation can come from any number of sources such as websites, advertisements, social media and more.
To distinguish between reliable and unreliable sources of information, you must think critically about what that source of information is telling you to do and why. For example, if you’re receiving information from a debt advice charity, it will at least be impartial and have your personal interests at heart. The same could not necessarily be said of the information provided by a profit-driven firm such as a bank or a credit provider. Equally, there’s likely to be much greater oversight of the information published in a quality print publication rather than a small commercial website.
- Know yourself
Another crucial step in improving your financial literacy is to understand your financial objectives and priorities. Before looking for financial information from a third party, you should consider:
- Your priorities: What stage of life are you at and how does that impact on your financial goals?
- Your personal values: Do you have any beliefs or values that could impact your financial behaviours?
- Your risk tolerance: How willing are you to take risks to help your money grow. This risk tolerance test is a good place to start.
- Your credit profile: What does your credit report say about you? If you have a poor credit score, think about how you can improve it.
Most importantly, don’t overestimate your financial literacy and if there’s something you don’t understand, never be afraid to ask questions. If you can’t find unbiased and helpful answers to your questions, contact a debt charity.
What steps have you taken to improve your financial literacy? Please share your experiences with our readers in the comments below.