You are educated but are you financially literate

  • Posted By : reliancesmartmoney.com
  • Wednesday Dec 26, 2018
Financial Literacy is a Life-skill

Your academic education might teach you ways to earn money. However, financial education teaches you ways to convert your money into wealth. In today’s world, where development is fast-paced, inflation makes your daily life difficult, and technology is disruptive, financial literacy plays an important role. Financial education today is a life-skill, which helps in making your journey towards your goals easier. Let’s start by understanding what financial literacy means.

What is financial literacy?

As defined by OECD International Network on Financial Education, financial literacy is 'a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being.' Based on this information, you can say that financial literacy is all about making sound financial decisions based on your financial knowledge, financial attitude and financial behaviour.

Here are a few points that can help you kick-start your financial education journey:

  • Financial Knowledge

    Knowing your finances is an important pre-requisite for handling them well. Start by recording - - every rupee spent. Keeping a record of your daily expenses helps you cut down on unnecessary expenses and, thus save more. Making monthly budgets can help you curtail impulsive buying. However, you should not just make budgets, but stick to them, as well.

    Next, list your financial goals. Calculate the real value of your goals by taking into account inflation. One of the common misconceptions people have about financial literacy is that savings are enough to reach your goals. Everyone faces uncertainties like illness, accidents, unemployment, thrift and inflation etc. from time to time. Having an emergency fund helps you deal with these emergencies without panic.

  • Your financial attitude matters

    Knowing that a delay in bill payment can lead to penalties is a part of your knowledge. However, making an effort to pay bills on time is a part of good financial attitude. Similarly, there is a difference between knowing the importance of saving and actually saving.

  • Have good financial behavior

    Caring about your household finances is a sign of good financial behaviour. A financially literate individual has lower impulsiveness and a greater desire towards achieving financial goals. Having good financial behaviour thus means curbing down your expenses and regularly and cautiously saving for your financial goals. Listing your goals and prioritizing them can be a part of it. Also, not letting uncertainties and windfalls affect your financial decisions is also a part of good financial behaviour. Your financial behaviour may consist of things as simple as having a credit card. A financially literate individual will know that having a credit card and paying the card bills on time helps in building a good credit score.

  • Make smart financial decisions

    As discussed earlier, financial literacy is about making sound financial decisions. By knowing your finances well, you can use technology to make smart investment decisions to achieve your financial goals. Technology not only answers your questions about “how to invest?”, but also makes your investment journey easier. You can have an all in one account where you can track all your investments at just one place. Online investing enables you to use tools like RoboAssist, which helps you compare different investment options and suggests you an investment that suits your finances.

Visit www.reliancesmartmoney.com, your one stop shop for all your investment needs.

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