In our article we will talk about the financial literacy of the population. What does this term mean? Who can be considered financially literate and how can you learn it?
Financial literacy. What is it?
Financial literacy is a person's ability to manage their income and expenses, make the right decisions on the distribution of funds (live within their means) and correctly increase them. In other words, this is knowledge that allows you to achieve financial well-being and stay at this level of your own development throughout your life. Financially literate people do not give in to panic even during the economic crisis, because they have a "gold reserve" in any difficult situations. They do not live paycheck to paycheck, and take loans only when it can bring benefits in the future.
In our country, people cannot be called financially savvy, since most of them grew up in a completely different era and are simply not used to thinking about financial well-being in the future and planning the receipts and expenditures of funds on a long-term basis. The generation of citizens that grew up during the Soviet era cannot teach children and adolescents all the nuances of the world of finance, because they themselves know practically nothing about this area of life. And this is evidenced by not quite happy statistics:
Fundamentals of financial literacy of the population
To gain some degree of self-confidence, financial management requires learning. In the world of finance, as in any other business, there are key points to learn:
1. Correct attitude to money. Citizen are used to treating money as a consumer - what they earned is what they spent. At the same time, practically nothing is postponed for a rainy day, and therefore there is no prospect of financial stability or well-being. Many work only to meet their current needs, and as a result, they do not manage money, but money with it. Money subjugates people, and they fall into bondage, which is problematic to get rid of. You need to change your worldview, because finance is only a tool to achieve your goals. Learn to manage money wisely! The country left the old way of life and passed into the era of capitalism, but no one taught people how to live with this very capitalism. Fortunately, it's never too late to learn, so all is not lost.
2. Planning a personal (family) budget and constant control of income and expenses. This is an important step towards financial independence. Only by keeping a constant record of the movement of your money, you will be able to quickly identify "unnecessary" costs, without which you can easily do without. When planning cash receipts, you will always be aware of what part of the funds can be used to generate savings, meet current needs, or close holes in your budget (repayment of loans). It is planning that will give a complete picture of all spending and show: you spend less than you earn, or vice versa. If the answer is the second, then you are on the edge of a financial hole and with a high degree of probability you are plagued by debts.
3. Formation of savings in case of unforeseen situations, the so-called airbags. Probably every author writing about financial literacy will definitely pay attention to this. It is recommended to keep from 3 to 6 monthly salaries in the form of an emergency reserve (reserve fund). Such a "safety cushion" can be accumulated by saving small amounts of any income. The crisis situation in this case will not hit your budget hard, and the pillow will soften the “fall”. And people also say that such savings as a last resort, allow themselves to feel more confident in life. For example, if you are fired from your job, then you will have something to live on for some time - you will not face hunger.
4. Additional sources of income and self-development. It is wrong to limit oneself to one's work as the only possible source for replenishing the family budget. Engage in self-development, investing not only in banks, but also in yourself (money and time)! This is the only way to broaden your horizons, which will allow you to find additional ways to earn extra money or make significant progress in your main job. The most valuable thing a person has is his knowledge and experience.
5. Fundamentals of investment. Any citizen should be aware that money can multiply. They should not mindlessly be stored in the "grandmother's stocking", but bring additional income. Moreover, any investment is invariably associated with a certain degree of risk. You need to be able to properly manage the investment process, minimizing all kinds of risks.
This is the so-called passive income, which can be obtained as a result of a profitable investment of your money. The simplest example of such income is a bank deposit (deposit). This is actually a win-win option for accumulating funds, because a certain amount of money invested in banks participating in the deposit insurance system is protected by the state represented by the DIA (deposit insurance agency) - $ 20000. Perhaps, this is precisely where the "investor career" should be started.
6. Knowing your rights. The financial world lives according to the laws established by the state. Therefore, you need to know your financial rights and be able to protect them. At a minimum, you need to have an idea of where to turn to with a complaint in case of violation.
We have covered only a few of the most important topic of financial literacy, but this is already enough to start moving in the right direction. Well, you can find out how to increase it in our other article.
Let us remind you once again that all this can and should be learned. And the main thing is to secure your own desire to become a financially literate person.
Financial literacy. What is it?
Financial literacy is a person's ability to manage their income and expenses, make the right decisions on the distribution of funds (live within their means) and correctly increase them. In other words, this is knowledge that allows you to achieve financial well-being and stay at this level of your own development throughout your life. Financially literate people do not give in to panic even during the economic crisis, because they have a "gold reserve" in any difficult situations. They do not live paycheck to paycheck, and take loans only when it can bring benefits in the future.
In our country, people cannot be called financially savvy, since most of them grew up in a completely different era and are simply not used to thinking about financial well-being in the future and planning the receipts and expenditures of funds on a long-term basis. The generation of citizens that grew up during the Soviet era cannot teach children and adolescents all the nuances of the world of finance, because they themselves know practically nothing about this area of life. And this is evidenced by not quite happy statistics:
- Almost half of the inhabitants of our country keep their money in the old-fashioned way at home. We are not used to increasing our capital, and numerous collapses and crises have only strengthened the distrust of banks;
- More than half of citizen do not use all kinds of financial services. And not because there is no such need. It's just that people don't understand how it all works and don't even know about their existence;
- Less than half of citizens know about the deposit insurance system, and the vast majority do not understand how the pension system works (and we are offered to invest in it in order to receive a decent pension in the future).
Fundamentals of financial literacy of the population
To gain some degree of self-confidence, financial management requires learning. In the world of finance, as in any other business, there are key points to learn:
1. Correct attitude to money. Citizen are used to treating money as a consumer - what they earned is what they spent. At the same time, practically nothing is postponed for a rainy day, and therefore there is no prospect of financial stability or well-being. Many work only to meet their current needs, and as a result, they do not manage money, but money with it. Money subjugates people, and they fall into bondage, which is problematic to get rid of. You need to change your worldview, because finance is only a tool to achieve your goals. Learn to manage money wisely! The country left the old way of life and passed into the era of capitalism, but no one taught people how to live with this very capitalism. Fortunately, it's never too late to learn, so all is not lost.
2. Planning a personal (family) budget and constant control of income and expenses. This is an important step towards financial independence. Only by keeping a constant record of the movement of your money, you will be able to quickly identify "unnecessary" costs, without which you can easily do without. When planning cash receipts, you will always be aware of what part of the funds can be used to generate savings, meet current needs, or close holes in your budget (repayment of loans). It is planning that will give a complete picture of all spending and show: you spend less than you earn, or vice versa. If the answer is the second, then you are on the edge of a financial hole and with a high degree of probability you are plagued by debts.
3. Formation of savings in case of unforeseen situations, the so-called airbags. Probably every author writing about financial literacy will definitely pay attention to this. It is recommended to keep from 3 to 6 monthly salaries in the form of an emergency reserve (reserve fund). Such a "safety cushion" can be accumulated by saving small amounts of any income. The crisis situation in this case will not hit your budget hard, and the pillow will soften the “fall”. And people also say that such savings as a last resort, allow themselves to feel more confident in life. For example, if you are fired from your job, then you will have something to live on for some time - you will not face hunger.
4. Additional sources of income and self-development. It is wrong to limit oneself to one's work as the only possible source for replenishing the family budget. Engage in self-development, investing not only in banks, but also in yourself (money and time)! This is the only way to broaden your horizons, which will allow you to find additional ways to earn extra money or make significant progress in your main job. The most valuable thing a person has is his knowledge and experience.
5. Fundamentals of investment. Any citizen should be aware that money can multiply. They should not mindlessly be stored in the "grandmother's stocking", but bring additional income. Moreover, any investment is invariably associated with a certain degree of risk. You need to be able to properly manage the investment process, minimizing all kinds of risks.
This is the so-called passive income, which can be obtained as a result of a profitable investment of your money. The simplest example of such income is a bank deposit (deposit). This is actually a win-win option for accumulating funds, because a certain amount of money invested in banks participating in the deposit insurance system is protected by the state represented by the DIA (deposit insurance agency) - $ 20000. Perhaps, this is precisely where the "investor career" should be started.
6. Knowing your rights. The financial world lives according to the laws established by the state. Therefore, you need to know your financial rights and be able to protect them. At a minimum, you need to have an idea of where to turn to with a complaint in case of violation.
We have covered only a few of the most important topic of financial literacy, but this is already enough to start moving in the right direction. Well, you can find out how to increase it in our other article.
Let us remind you once again that all this can and should be learned. And the main thing is to secure your own desire to become a financially literate person.
