Every single week, we all make hundreds of decisions about money. Whether that’s wondering, “Should I really stop for that latte on the way to work?” or paying a couple of bills that arrived in the mail, our finances are never too far from our minds.
But how much do you really know about money? You may be somewhat comfortable with your daily spending, but being financially literate is much more than that. And with over 50% of Americans living paycheck to paycheck, it seems that many of us could use a bit of a boost when it comes to really understanding how to make our money work for us.
What is financial literacy?
Before we dive into the details of how to become more financially literate, we should probably explain what that means. In its most basic form, financial literacy is about how well you understand finances and your everyday money situation. Think of it like actual literacy (aka how well you can read and write), but for numbers instead.
For most people, having basic financial literacy comes down to an understanding of:
Earnings and income
Investing is also a topic that comes into being financially literate, but knowing about the above four areas are the foundations to help you make better decisions when it comes to your money.
One thing to remember is that being financially literate doesn’t mean that you have zero debt and stacks of cash sitting in your bank account. If you do, that’s great! But simply knowing how to talk about money confidently and make well-informed choices about your finances is really what this is about.
Why is being financially literate helpful?
As the old saying goes, knowledge is power. So having a better grasp of financial management techniques can put you in a better position when it comes to deciding how to use your money.
If you’re not convinced yet, hear us out. There are some concerning statistics out there that shouldn’t be ignored. The average American household carries around $8,300 in credit card debt and over 200,000 people filed for bankruptcy by the end of 2019. As you can see, pushing your financial problems to the side and not seeking help can lead to disastrous consequences.
But it’s not all bad news. The Council for Economic Education found that young adults who have some form of financial education are less likely to carry significant debt and are more likely to receive financial aid or grants when applying for further education opportunities.
Even if your college days have long since passed, having a better understanding of personal finance puts you firmly in control of your situation. You’ll feel more confident and decisive about what you need to do to address any debts or issues that you’re facing, along with having set goals to aim for.
Not only will you have a more stable financial life and be proud of what you’re achieving, but you’ll also help yourself avoid possible financial black holes like identity fraud or theft. Think about it—if you rarely check your bank or credit card statements, how do you know if there’s something amiss?
By being proactive about your finances, you can catch any red flags and alert the right people before there's a lasting and damaging impact. You’re so much less vulnerable when you know exactly what’s happening with your money, which ultimately leads to a less stressful life.
Ways to become more financially literate
No matter how old you are or what your current money situation looks like, there’s always room to learn and improve. Take a look at some of our suggestions to boost your financial knowledge this year.
Read, read, and read some more
If you’re really serious about having a better working knowledge of your finances, it’s time to hit the books. There are hundreds to choose from so take the time to browse in your local bookstore or library until you find a couple that sound good to you.
Online publications are also an excellent resource if you prefer to stick to more up-to-date materials, especially about subjects like investing and the stock market which change so frequently. The Financial Times is one of the best and oldest newspapers that dedicates its pages to all things money.
There are tons of finance bloggers and magazines to take a look at, so start with a quick Google search on specific questions or topics that you’re interested in. Sites like NerdWallet, Investopedia, and Student Loan Hero have plenty of information to get you started on your journey to financial literacy.
Listen to money podcasts and audiobooks
When you have some hours to kill on your commute or at the gym, audiobooks and podcasts are excellent ways to fill that time. You might not have a hand free to take notes, but listening to money and finance content will help you to learn quickly and figure out exactly where your knowledge gaps are.
When it comes to podcasts, these can range anywhere from about 10 minutes to over an hour, and some feature guest speakers while others rely on an expert podcast host. Take a look at the podcast description and show notes for recent episodes to see what resonates with you. Popular choices include Money For The Rest of Us, Optimal Finance Daily, Afford Anything, and NPR’s Planet Money.
Take a financial literacy course
Learning on your own and in a way that works for your schedule is always helpful, but sometimes you need to be forced to take action sooner. A financial literacy course is a great way to meet new people who are new to this type of work too, along with gaining access to a dedicated instructor who can answer any specific questions that you might have.
Whether you decide to enroll in a class at a local college or take something online, having structured learning time each week or month can help you get up to speed faster, which means that you can take action sooner.
You could even make this a family activity! After all, one in four parents reports that they never speak to their children about finances and, as we’ve seen, learning this kind of information as soon as possible can make a big difference when it comes to a healthy financial future.
Use different financial management tools
Learning about financial topics doesn’t have to be scary or boring. If you love technology, make it work for you as you progress on your financial literacy journey.
Software like Mint or You Need A Budget (YNAB) are some of the most popular ways to plan and manage a budget, which is one of the first key steps in building good financial habits. If you’re ready to start investing, sites like Personal Capital, Acorns, Betterment, and Robinhood are all user-friendly options to get you going.
Knowing roughly what your credit score is off the top of your head is also incredibly helpful. CreditKarma is a free site and app that gives you an instant look at your score, what loans or credit cards the different bureaus have on record, and even provides helpful suggestions of ways to improve your score.
Put your financial knowledge into action
As you start to learn more about your money and how to make it work for you, you’ll be amazed at what options suddenly open up.
Whether it leads to you paying off debts faster or saving for that new home you’ve been dreaming of, having a good understanding of the financial world and where you fit into it can make a huge difference in your life.
So what are you waiting for? Crack open those books or hit “play” on that podcast to start your money mission right now.