Any way you cut it, having better financial literacy skills is essential in getting ahead in a more and more complex world.
Controlling your money and being ‘good with money’ directly affects the quality of your life. The amount of knowledge and control you have over your money, is a key factor in choosing how you lead your life.
There are a lot of very good scammers after your money. Having financial literacy helps you avoid parting with your hard earned cash unnecessarily or prematurely.
Financial literacy is an important part of our everyday lives and there is more and more talk in Australia about the need for financial literacy for both younger and older people alike. We ALL have a need to be financially literate.
Often people get into trouble with money because they don’t think through things properly before taking action. It is human nature to sometimes rush in and get emotional but being financially literate means knowing you need to take extra time to get things right up front.
“measure twice, cut once”
Let’s look at what’s involved in something as fundamental as buying a car. Most people think all you need is a car you like and enough money to buy it. When in fact, there are 5 key things to consider before buying:
You need to know if you can afford to buy a car. To know that, you need some kind of budget. A budget will tell you if you have the money to pay for the car outright or if you can afford to repay a loan.
If you need a loan, then even more financial literacy is required. Do you get the loan from the car dealer? How much interest will they charge you? How does that compare with a loan from your bank? Knowing how to negotiate loans can save you thousands of dollars.
How you get sufficient insurance and how much you pay for it is very important.
Can you afford to buy petrol? Can you afford to have it serviced regularly? Once again, a budget will help you determine this.
Buying the car:
Finding a car in your price range and negotiating the purchase of it is only part of what needs to be considered.
Let’s look at Anna’s story:
Anna is studying and working part-time. She’s just got her P’s. It’s a very exciting time in Anna’s life. She finds a great car. She doesn’t have quite enough money of her own to buy the car so she takes on a loan from the dealer. Freedom – she is ready to take on the world!
Later, Anna found out the hard way about cashflow, insurance, and maintenance. Unfortunately, it’s a very common story: Anna ended up increasing the limit on her credit cards and eventually couldn’t afford the combination of loan and credit card payments. Having a car was no longer exciting as the financial strain of keeping the car fuelled and maintained was causing real headaches in her life.
Anna now knows through experience:
This is what financial literacy is all about.
Another complication in Anna’s case was that she asked her grandfather for help. Her grandfather went guarantor on a personal loan for Anna to get her credit cards under control. This may only increase Anna’s money problems (and the grandfather may be liable for a lot more than he anticipated).
Rather than being ‘saved’, the better goal is to get Anna financially literate so she is able to use her money powerfully and live within her means. If Anna can move on from her early financial mistakes and take financial issues seriously, then her future can be very bright.
“an ounce of prevention is worth a pound of cure” – Benjamin Franklin
A budget, a plan, a strategy will save you from possible financial hardship, even bankruptcy or homelessness and perhaps save the people who love you from also coming under financial stress.
Financial Literacy puts you in control of your money. It determines what kind of holidays you take, the type of house you live in, if you can afford a high level education and how long you have to work. If you want to retire young and have a good lifestyle, you will need good financial literacy.
Financial literacy is essential to individuals, businesses and countries.
Of all the things you could study, a financial education is probably the subject with the most reach as it will help you in ALL areas of your life.