Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Financial Literacy: What Is It, and Why Is It So Important?
Moneymagpie Team
27th Sep 2023
The UK ranks above average in many areas, but financial literacy doesn’t appear to be one of our population’s strong points.
According to the Organization for Economic Co-operation and Development (OECD), the UK population falls short in comparison to other countries when it comes to being what we call financially literate.
Ranked 15th out of 29 OECD countries, the UK discovered that only 67% of adults feel completely competent and confident in managing their money.
If you’re thinking you could benefit from learning financial literacy, you came to the right place.
The following article paints a clear picture of what it entails to be considered good with money, why it holds such great significance, and how you, too, can master this essential life skill.
- What Is Financial Literacy?
- Why Is Financial Literacy So Important?
- Protecting Your Financial Data Online
What Is Financial Literacy?
Best described as the ability to comprehend and utilize various money-wise skills and concepts, financial literacy results in better-informed financial decisions.
Being money-savvy doesn’t just mean you know how to balance a checkbook. It means you hold the skills required to understand the ins and outs of how money works, the implications of spending (both good and bad), and the avenues available for maximizing your resources and growing your profit.
Research revealed that 39% of adults (20.3 million) in the UK don’t feel confident in their ability to make wise decisions regarding their money. Understand how to manage your money effectively, and you’re much less likely to overspend and make costly mistakes.
Financial literacy encompasses a wide array of knowledge, including:
- Budgeting;
- Saving;
- Investing;
- Understanding loans, taxes, and financial products.
Essentially, being “good with money” means you can easily navigate the complex world of personal finance with total confidence and competence.
Why Is Financial Literacy So Important?
According to research, only 6% of 16-24-year-olds say they’ve learned about finances in school.
It’s no wonder the UK is struggling to meet the standard of financial literacy.
Imagine the positive impact it would have to implement financial classes into our education system, preparing students to be smart with their money at a young age.
This isn’t just a fancy new term to add to your vocabulary; being financially sound is a fundamental life skill that impacts every aspect of our lives.
- Long-term Planning Skills: Understanding your finances allows you to set realistic goals and gain control over your future. Whether you have aspirations to purchase a home, fund education, or retire comfortably, you’ll be better equipped to achieve these goals with financial knowledge on your side.
- Smart Decision-Making: Investments and loans, along with other financial matters, require you to make money-conscious judgments. Being able to differentiate between a good investment and a risky one might just protect your long-term financial wellbeing.
- Manage Debt: Avoid common pitfalls like excessive credit card debt and predatory loans. Expand your knowledge and gain a solid understanding of interest rates, payment terms, and the consequences of accumulating debt. Your awareness of these matters will enable you to make sound decisions and avoid financial traps.
- Safeguarding Against Scams: Having your money fall into the wrong hands is a nightmare. Learning about common red flags and tactics frequently used by scammers will help heighten your awareness of fraudulent activity and common financial scams.
- Planning for the Future: Anticipate future monetary needs by creating an emergency fund or saving for retirement. Being proactive is key to securing your financial stability. It ensures that you’re not only living well in the present but also preparing for a secure and comfortable future.
Protecting Your Financial Data Online
Keeping your financial data safe and secure is no longer an option in 2023. With online transactions becoming the norm, the need for cybersecurity is greater than ever.
Here are some tips to enhance your online financial security:
- Use Strong Passwords: Create unique, strong passwords for your financial accounts, and be sure to change them regularly.
- Enable Two-Factor Authentication (2FA): Add an additional layer of safety by requiring two forms of verification, a security measure beyond your normal password.
- Regularly Monitor Accounts: By keeping a close eye on your financial accounts, you’ll catch any unauthorized transactions or suspicious activities before it’s too late.
- Beware of Phishing: Be cautious of unsolicited emails or messages asking for personal or financial information. Legitimate institutions won’t request this information via email.
- Get Your Free VPN: Virtual Private Networks were created to protect sensitive financial data. VPNs encrypt your online activity and help maintain your privacy even when using an unsecured public Wi-Fi network.
Conclusion
Financial literacy is no longer just a skill you learn. It’s a superpower.
Make smart decisions with your money, and don’t forget that once you expand your knowledge (and hopefully your savings), protecting your account is crucial to ensure safe banking practices.
Utilize cybersecurity tools to be certain that your financial information remains confidential and secure in our increasingly interconnected world.
Get the most out of your financial resources and experience the reward of financial security, peace of mind, and a brighter future.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.26
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