The question “Why is financial literacy so important?” can be answered by just two data points from the Report on the Economic Well-Being of U.S. Households in 2017 study by the Federal Reserve. The report found that 74% of Americans adults say they are living comfortably, but if a $400 expense arose tomorrow, 41% would have to borrow money, sell a possession, or just ignore it. To put that into perspective, in most states $400 would barely cover two uninsured primary care doctor visits.
Planning for rising education costs, medical expenses, and housing prices requires financial literacy, and education in even the basics, like paying off credit cards each month or making sure your income outweighs expenses, can empower consumers to make better financial decisions.
Below we’ve rounded up 10 financial literacy tools and resources for adults to help you on your journey to successful financial planning.
1. Financial literacy apps
Financial literacy, which refers to both your knowledge of and ability to use financial skills, is one of the most important factors in smart money management. Although this is an area where many people are lacking, there are more options than ever to learn about personal finance. Financial literacy apps, in particular, are the perfect way for both adults and kids to become more knowledgeable about money. Our team of experts has analyzed all the most popular options to bring you our picks for the best financial literacy apps for December 2021.
The Ascent’s best financial literacy apps:
- World of Money: Best financial literacy app overall
- Zogo: Best financial literacy app for bite-sized lessons
- RoosterMoney: Best allowance app
- Investmate: Best financial literacy app for investing education
- FamZoo: Best financial literacy app for families
- Savings Spree: Best financial literacy app for games
- Penny | Master Your Money: Best financial literacy app for audio lessons
2. Hit the Books
In order to get started, personal finance books will become key in your quest to be financially literate. It was crucial for my education, especially coming from no background in finance or investing.
Dedicate a minimum of 1-2 hours each week to reading books about managing your money, investing, how to budget, etc.
3. Enroll for a short-term course
If you are serious about furthering your financial literacy level, you can enroll for a short-term course. Always remember free ways to gain financial literacy often has its own shortcomings and there is only so much you can rely on it. There are many short-term courses that you can pick up and one has to first decide which aspect he wants to obtain deeper knowledge. For example, a course in Personal Finance often involves programmes like Chartered Wealth Manager and Certified Financial Planner. Similarly, there are different courses around corporate finance, investment banking, international finance and financial management. If you are running a business, a specialized course around financial modeling can be very helpful. Financial modeling is a course that uses excel to to depict financial statements and investment analysis.
4. Understand the “Cashflow Quadrant”
Read “Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom” by Robert Kiyosaki. Most people don’t know that there are four broader ways of making money – employment, self-employment, business and investing. And it’s kind of like a ladder; you can work your way up to being an investor, but you need resources and specialized knowledge to do well in that field. As Warren Buffet said, a better business owner makes a better investor.
5. Use Financial Management Tools
One great way to gain financial literacy is to attach a finance management tool to your personal accounts. Sign up for one of these services and connect your checking, savings, credit cards and mortgage. Financial management tools like Mint are great aids to improving financial literacy. These tools will also help manage your personal finances. It’s a win/win.
6. Read newspapers and magazines
Another great way to improve your financial literacy is to start reading newspapers and magazines geared toward money matters:
- Begin to read the financial section of your local/regional newspaper.
- Read finance and business newspapers like the Wall Street Journal and The Financial Times. Both provide insight into the domestic and global world of finance and business.
- The Kiplinger Letter remains the longest continually published newsletter in the United States. In 1947 Kiplinger’s created the nation’s first personal finance magazine.
- Additional magazines to check out are Barron’s, Fortune, Forbes, and Money.
7. Search the internet
There are many online resources to improve your financial literacy. Many of the cable news networks have websites with a finance tab. Some educational resources provide tutorials that can cover single topics. Use your favorite social media channels to follow financial experts on Twitter or LinkedIn, or maybe join a personal finance Facebook group.
8. Start keeping a budget
All of the financial guidance from experts won’t mean much if you don’t know where your money is going every month. Start tracking your spending and set up a budget using a simple spreadsheet or website apps.
9. Talk to a financial professional
A financial professional can answer your financial questions, whether it is about the basic day-to-day money situations or more complex long-term scenarios. They can also assess your current situation, help you make a plan for all of your financial needs and help you stay on track going forward.
Whatever your level of financial literacy, it’s important to keep your knowledge base growing. Any step you take toward getting a better handle on your financial situation is a step in the right direction. The key is to just start. Knowledge is power and can help you make more wise and confident financial decisions.
Conclusion
Financial literacy is a major life skill one needs to have as it increases your financial capability. Planning finances, managing budgets and savings should be taught right from the school days. However, it’s never too late to learn about it. One can improve financial literacy by understanding the components of it. One can always begin their investment journey even after they turn 50. But starting early has its own benefits.
