Financial literacy in its simplest form is the knowledge of money matters. A financially literate person would know how a checking account works, how a credit card figures into one’s budget, and how to avoid being in debt, among others. The main goal of financial literacy is to educate people so they can make decisions on finances that are both responsible and sound.
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Image source: investopedia.com
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The impact of financial literacy can be felt most at home. It affects a household’s issues regarding funds. Budgeting daily, weekly, and monthly expenses, buying a house or a car, going on a vacation, saving for a child’s schooling as well as one’s own retirement, all involve financial literacy.
Over the years, financial literacy has gotten more significant. Take for instance retirement planning, which is an indicator of consumers beginning to shoulder more financial burdens. Without financial literacy, retirement would be a perilous journey, especially for those who no longer have income. Financial literacy enables one to understand things such as nest eggs and pension plans, and actively participate in the planning of their own funds.
Financial literacy is also invaluable when a person is about to invest in something big, like a house or a car or insurance, especially if he is planning to take out a loan for it. The processes to take out the loan and invest are all very technical. And financial literacy is the compass that guides a person through it.
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Image source: diygenius.com
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Kami Hoss, MS, DDS, is the CEO of The Super Dentists, the largest pediatric dentistry and orthodontic practice in San Diego. He is also a philanthropist and is part of Junior Achievement of San Diego Country, whose programs such as the JA BizTown teach elementary school students about financial literacy. For more articles like this, visit this blog.
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