Financial literacy helps one to manage their money. The goal of final literacy is to help an individual understand the basic financial concepts, which in turn, will allow one to manage their money well. Education of financial literacy is a life skill and it deals with a wide arena of topics like budgeting, insurance, investing, loans and interest. A strong financial literacy proves to be helpful in managing retirement, education and travelling goals. Four main components in which financial literacy plays an active role include budgeting, investing, saving and debt.
1. Budgeting
This key aspect deals with planning and managing money. Budgeting can be used to understand the spending habits of an individual. Good budgeting helps one to meet both their needs and wants while taking care of an actionable financial plan which allows saving. Depending upon your goal, budgeting can be done for meeting short, medium and long term financial goals.
2. Investing
Imagine that you have won a Lottery Sambad and you are happy after seeing the Teer Result but then, soon wonder what you should be doing with the money. Investing the money that you have won is a good step to ensure that you grow your wealth. Financial literacy will help you to understand what kind of investment should be made to earn maximum return on the principal amount.
3. Saving
It is always recommended to keep the sum of money that you want to invest and save separately. It is because saving enables you to secure your present for the future. It is important to have liquidity in the savings that allows you to easily retrieve the money when you want. Many people also save to meet different other goals like paying loans, for education and keeping a certain sum of money separately for retirement. Personal financial literacy will help you in creating an emergency fund too.
4. Debt
Debt is always considered bad but the fact is that there is good debt and bad debt. Financial literacy helps you in understanding debt management and will empower you to understand the difference between good debt and bad debt. Further, it helps one from drowning under the burden of bad debt.
No matter how much you earn, investing in financial literacy is always important because it will help you maximize the income that you earn to transform your life for the better.