Learn the basics to build a strong future.
Written by Katie Boushall
Reviewed by Daniel Gonzalez
Many people talk about the importance of financial literacy, but it often seems confusing because it’s not commonly taught in schools. IndeKnow wants to change the accessibility of financial literacy by creating easy-to-understand educational content about essential financial topics.
Every day, individuals spend money and make transactions, like buying coffee or shopping online. To make smart decisions, whether for small purchases or big ones like buying a home, it’s important to keep improving financial knowledge. In this insight, we’ll discuss what “financial literacy” really means and why it’s so important for everyday life.
According to the U.S. Department of Education, financial literacy empowers individuals to understand how to earn, manage, and invest money. With strong financial literacy, people can make informed and effective financial decisions, leading to better financial outcomes.
Financial literacy provides numerous benefits to those who expand their financial knowledge. Individuals don’t need to be a finance expert to manage their money wisely. By taking small steps to improve their understanding, people can make better daily choices that lead to greater financial stability, help build wealth over time, and prepare for handling financial challenges.
Increasing financial literacy significantly enhances one’s financial wellbeing. The Consumer Financial Protection Bureau defines “financial wellbeing” as the level of security and freedom provided by a person’s financial situation and money choices.
By learning how to earn, manage, and invest money, individuals can improve their financial wellbeing and set goals aligned with their desired lifestyle. Proper financial management can open new opportunities, such as traveling, pursuing education, or moving to a safer neighborhood.
Financial literacy can also impact a person’s level of relational freedom. Understanding how money works reduces peoples’ dependency on others who might exploit financially vulnerable individuals. Financial literacy grants people more freedom in navigating relationships, whether with a significant other or an employer.
Additionally, applying financial literacy to everyday decisions helps individuals cope with financial problems, such as divorce or medical bills from a health crisis.
For those who learn and practice financial skills, financial literacy is a powerful tool that brings greater choice and peace of mind.
If financial literacy feels overwhelming and you don’t know where to start, take it step by step. Begin by examining your spending habits and tracking your income. Adjust your spending if you notice you’re overspending in one area and direct those funds towards more essential or value-aligned expenses (or savings). Breaking the process into small, manageable steps makes improving your financial literacy much easier.
Consumer Financial Protection Bureau. (n.d.-b). Why financial well-being?. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/consumer-tools/financial-well-being/about/
Federal Student Aid. (n.d.). Financial Literacy. Federal Student Aid. https://fsapartners.ed.gov/knowledge-center/library/functional-area/Financial%20Literacy
