Understanding Finance: Defining Financial Literacy

Jeremy Cole

Financial literacy

UNDERSTANDING FINANCE: DEFINING FINANCIAL LITERACY

UNDERSTANDING FINANCE: DEFINING FINANCIAL LITERACY The definition of financial literacy is the ability to understand the financial skills necessary for personal money management. These include areas such as budgeting, saving and debt management. People who are financially literate are less likely to be victims of financial fraud, more likely to be able to save, and less likely to get themselves into unmanageable levels of debt.

Learning Financial Skills and Concepts There are various financial skills and concepts that form the basis of financial literacy. Learning these skills can result in a lifelong improvement in financial management.

PEOPLE LACKING AN EDUCATION IN FINANCIAL LITERACY HAVE A HIGHER LIKELIHOOD OF ACCUMULATING DEBTS THEY CANNOT SUSTAIN.

Making simple lifestyle changes such as creating a household budget, paying bills promptly and setting savings goals, no matter how small, can all have a long-term positive impact on money management.

When these concepts and skills are implemented into daily life from a young age, most people will find they are financially better off as they get older.

The Negative Impact of Financial Illiteracy People lacking an education in financial literacy have a higher likelihood of accumulating debts they cannot sustain.

Poor debt management can reduce your credit score, making it harder to secure further credit. In some cases, it can lead to situations such as bankruptcy or housing foreclosure.

JEREMY COLE You can learn more about financial literacy in Southeast Asia by visiting the blog of Jeremy Cole, Red-Rose co-founder.