How Does Being Financially Literate Help You Make Better Financial Decisions?

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Financial literacy is often overlooked, or an underappreciated skill. The importance of financial literacy is more than just about how good you are with money, it helps you make better decisions in many other areas of your life. Many of these areas create domino effects, where good and bad decisions start to impact everything else.

Not many schools teach you financial literacy from a young age, but it is never too late to learn. Knowing how to be financially literate can help with your money habits and life as a whole. If you need help learning about the importance of financial literacy, then this information is for you.

Knowing the Importance of Saving

Most people know how useful saving your money can be for achieving your financial goals. Saving money is not just about putting away your income in a piggy bank and not touching it. When saving money, you want to think about interest rates for certain savings accounts. Higher interest rates mean a bigger return on your savings. This means that the more you put into this account, the more you will get in return for this amount. Usually, it is a small percentage (under 10%) but there are many options out there. Likewise, a TFSA (tax-free savings account) is useful for storing away large sums of money. Some banks will require a fee or tax on savings, but a TFSA is great for saving money without any concern for hidden fees. Good financial literacy means being able to keep your hands off of your own money.

Knowing When to Use Loans

Loans are an often forgotten piece of knowledge that is related to financial literacy. Big financial decisions that require a large sum of capital in a short period of time are the most obvious time to get a loan, but not the only time when they are needed. The purpose of the loan is much more complex than simply borrowing money, and these experts show how easy it is to apply for a quick loan from professionals online for personal, business, or other reasons. Even if you do not need a loan now, you may need one eventually, and it is good to do your research on when you might need it. Learning about certain financial offers is a key part of financial literacy. Expanding your knowledge in money issues is never a bad thing, and will make a much better-rounded person in the process.

Learning About Investing

Making money from your job is earned income, while investing is known as passive income. Too many people are unaware of what these terms are and only see their money as a reward for their job. Some of the most wealthy people in the world are not a CEO of any company. Money through investments is a good way to build up a retirement fund without having to work until you are excessively old. There are significant amounts of investing apps and websites to learn from. YouTube has a good amount of videos to teach you about terms like compound interest, dividends and how to buy, sell or trade stocks. Learning about investing is an important pillar of financial literacy because it can help you develop better money smarts for your financial decisions.


Similar to saving, budgeting is a conscious effort to limit your spending. Budgeting your money and spending is a good way to create a strong understanding of financial literacy, and a good way to start making smarter financial decisions. Budgeting your money can be as little or big as you would like it to be. Cutting back on your eating out, getting drinks, and unnecessary spending will net you much more savings by the end of the year. Keep track of receipts and bank statements to see how much you spend and make a plan from there. Another good idea is to stop using your credit card for small purchases, as they add up. Credit cards are good for building up your credit score, but you should not become reliant on them for your spending. Use cash too, and suddenly you will see how important budgeting is to your spending decisions.

Financial literacy is a crucial underdeveloped skill in a lot of people. From young to old, knowing the importance of your spending, saving, and investment habits (or building this knowledge) will keep you on the right track to remaining financially stable, independent, and eventually thriving. The ways in which you learn about finances will reveal to you a new world of possibilities regarding your financial decisions.