If you’re still scanning the horizons for a sign to begin your financial literacy journey, this is it! Read on to understand the four important pillars of financial literacy.
If you’ve recently found yourself nodding mutely amid a group of financially savvy people discussing their investments, returns or savings strategies while secretly wondering what they’re on about, perhaps it’s high time you begin your journey towards financial literacy. Once you have the basic concepts in place, you’ll quickly realise it’s all smooth sailing from there into a bright financial future.
Being financially literate will give you a confident understanding of basic financial concepts such as investing, saving, and effective credit and debt management. The better your understanding of these concepts, the more adeptly you’ll be able to plan strategically for large purchases or investments, grow your long-term/emergency savings, and pay off debt efficiently. The benefits of financial intelligence are certainly clear!
1. Credit
Credit refers to any funds that you are able to borrow to purchase goods and services with the obligation that you will repay these funds at a later date. This would include Credit Cards and loans such as Personal Loans and Home Loans. When you apply for a line of credit, lenders will run a credit check on you to gauge your repayment capacity and to ascertain that you will not default on your loan or Credit Card bill payment.
Being financially literate will give you an edge in this regard. For instance, you will be in the best position to decide when to apply for a line of credit and make an informed decision about which loan or Credit Card would best suit your profile. By checking your Credit Score regularly, you will know the key factors that affect your credit worthiness, in which areas specifically you need to improve your score and the reasons that impact your score. Credit Score is that one single number that will place power in your hands.
Additional Reading: What’s A Good Score For Easy Loan Approval?
2. Savings
Smart and efficient budgeting using a method of your preference will work wonders for your savings. A regular and disciplined savings plan will ensure that a portion of your hard-earned income is set aside safely so you’re covered for specific reasons.
Clearly defined savings goals such as retirement, a house, children’s education and higher education, or even that world tour to ring in your 60th birthday, will help you chalk out a refined plan towards achieving an end financial goal. Financial literacy will help you with your savings planning and investment in the right financial instruments for you.
3. Budgeting
The way to enhanced savings is via clearly defined limits skewed towards maximising our money. In other words, budgeting. Once you have a clear blueprint for the allocation and separation of your income, you will have a strong handle on your finances and where your money is going.
Being financially literate, you will be able to analyse your earning versus spending and prioritise smartly. You will know exactly where to curtail spending or where to boost it in order to optimise your money.
Additional Reading: How To Become The Rockstar Of Budgeting
4. Investing
Investments may include real estate, mutual funds, stocks and so forth. If you’re financial literate, you will know exactly how to allocate your money into specific channels with the objective of gaining interest and enhanced return on investment. With knowledge about investing, you will be able to understand the various investment avenues available for you, the risks involved, just what your risk appetite is like, the returns you could expect and related investment knowhow such as the tax implications of such investments.
Financial literacy will reveal the sheer magical power of compounding and how you can grow your money via smart investments instead of parking it in traditional savings vehicles such as Fixed Deposits or your Savings Account.
With a high level of financial literacy, you will unlock a bright financial future with a high degree of confidence in basic financial concepts such as debt management, savings and investing.
Unsure of where to start? May we suggest the Finance 101 section of the BankBazaar mobile app. Ready to make your foray into accessing quick lines of credit? Take a look at some of the lifetime-free Credit Cards we have on offer. With pre-approved/pre-qualified offers and a completely contactless, digital process, you’ll be well on your way in a jiffy!