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When it comes to your finances, knowledge is power

When it comes to your finances, knowledge is power

April 03, 2024

No matter what kind of decision you’re making in life, it always helps to understand the implications of that decision, and your personal finances are no different. The more you know about money, saving, investing, and other financial topics, the better decisions you can make.

 

As part of April’s Financial Literacy Month, we want to give you a better understanding of why financial literacy is so important, and how you can increase your knowledge to help build a brighter future.

The importance of financial literacy

Financial literacy is at the heart of smart financial decision making. Whether we like it or not, money is an important part of your life. It provides you the ability to buy necessities and take care of your family. And what you do with your money can have a greater impact than you think. Increased financial literacy has been linked to:

 

  • Increased savings and wealth
  • Lower debt levels
  • Better marital relationships
  • Increased lifestyle flexibility
  • Improved mental health

You might need more education than you think

You probably have a college degree, and you might even have an advanced degree. So, as a relatively intelligent person, you may assume that your financial understanding is above average or average at worst. But you might be wrong.

 

It’s possible you’re caught in what’s known as the “Lake Wobegon effect”, where your above-average competency in other areas makes you believe that your financial knowledge is also above-average. The result? You may be putting off learning about financial topics that could help you increase your financial literacy and make better decisions.

Financial literacy topics

When it comes to your finances, there is so much to learn. You can start by breaking knowledge categories down into a few different areas, and then learn about topics within a given financial category:

 

Category

Topics

Budgeting

●     Planning for the future

●     Reducing expenses

Saving

●     Compound interest

●     Tax-advantaged accounts

Investing

●     Stocks and bonds

●     Real estate

Debt management

●     Credit cards

●     Personal and car loans

Real estate

●     Mortgages

●     Interest rates

Insurance

●     Home and auto

●     Life insurance and annuities

 

Be careful where you get information

You likely don’t want to go back to school to get a finance degree, but there are still other ways you can build your financial knowledge. The internet has plenty of great resources to learn from. Just make sure you are utilizing unbiased, reputable sites. Some financial sites simply provide content in an attempt to sell you financial products of their own, and they should not be trusted.

 

Alternatively, you can take a course with Khan Academy, Coursera, or another online course provider. Or, if you have access to a financial expert, they can be a great way to learn some basic financial ins and outs while potentially setting yourself up for the future.

Financial literacy leads to better decisions

Increasing your financial knowledge isn’t an exercise unto itself: it’s important to help you make better decisions. Whether your goal is to get out of debt, build your wealth, plan for retirement, or leave an inheritance to your loved ones, having a solid understanding of financial principles equips you with the tools and confidence to navigate your financial journey successfully.