By Jessica Kane
Americans are struggling with financial literacy. The FINRA Investor Education Foundation, which completes national studies on financial capability, reports that current financial education is not enough to make us money smart. According to their reports, Millennials and young adults were the groups with the most to learn about financial matters. Lack of financial literacy can spell trouble, often resulting in bad money decisions, lack of savings, and declines in credit scores. Bad financial decisions can have a trickle-down effect on our economy as a whole.
What is Financial Literacy?
Having financial literacy means having an understanding of how money works and how to handle personal financial matters. Someone who is financially literate should have an understanding of interest rates, investments, risk, budgeting, and other basic accounting principles. Understanding how money works is important for success in managing money and preparing for the future. Unfortunately, education on these financial matters is often overlooked. Developing a greater understanding of money and associated topics can help you make better plans and more easily achieve financial goals like getting out of debt, saving for retirement, preparing for life events, and even planning your next getaway or big purchase.
Tips for Improving Your Financial Literacy
There are numerous resources available to help overcome a knowledge gap in money matters. The important thing is to consider your source carefully. It is a good idea to use multiple methods to develop financial literacy. Here are five easy, effective tips for improving your knowledge:
I. Track Your Money
This one is really simple. All you have to do is track where, when, and how much you’re spending throughout the month. Check out the details on how to track your spending over at The Simple Dollar. Having an idea of where your money is going can help you cut costs and get a handle on spending. Once you have a record of where your money is going, you can make changes that will free up some of your income and help you reach your goals.
2. Take a Class
Check out college courses on basic financial topics. You won’t necessarily need a student loan to take advantage of these opportunities either. Some schools offer free classes and online options. Look for topics that cover financial basics, accounting, budgeting, or that are geared toward savings and investments.
3. Watch a Video
Many people learn more easily by watching a video than they do reading the same content. If you learn this way, look for videos on financial topics. Check out a TED talk or look for free content on popular streaming sites. The National Bureau of Economic Research has even started offering free visual tools for learning including a video and an interactive tool.
4. Run the Numbers
Don’t be afraid to do the math yourself. This will help you improve your math skills, build literacy, and make sure every deal or investment you consider is really what it claims to be. If you’re uncertain about the math part of it, don’t be. There are plenty of online resources that can help you calculate everything from borrowing costs to debt ratios. Check out the free calculators over at Bankrate.
5. Read the Fine Print
When you’re making decisions that relate to financial matters – like choosing a credit card or deciding on a loan – carefully read the fine print before signing anything. You can learn a lot and make smarter decisions when you understand the terms and conditions.
With a minimum amount of time and these tips, you can easily begin to improve your financial literacy. This will lead to better financial planning and make it easier for you to achieve your goals. The important thing is to keep learning so you can continue to grow and make even better decisions in the future.
Jessica is a professional blogger who writes for Faxage, a leading company that provide Internet fax service for individuals and businesses.