How Important is Financial Literacy?

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Everyone needs to learn about money because its importance cannot be overemphasized. Money is one of the important sources of survival. Other sources include food, water, air, and more. Even food, which is a source of survival requires money to be purchased, likewise air, for many that rely on supplemental oxygen to survive. The list is endless. The subject matter of financial literacy concerns both adults (young and mature) and teenagers.

Financial literacy has to do with getting to comprehend and use various financial skills. These life skills, such as saving, investing, financial planning, and so on are what we learn and practice to become financially mature.

There are so many negativities associated with financial illiteracy. Hence, the need for us to see how important financial literacy is.

Importance of Financial Literacy

1. Financial literacy will help you make better financial decisions. You get to know what to do with your money. I recall when I started working as a school teacher while I was waiting to be admitted into the university. Whenever I received my salary, I would put all the cash in a purse. Now, this purse was meant for spending, meaning whatever went in there was for spending. Then, I was financially ignorant. I had no idea there was a need for me to split the money, save a percentage, and then maybe keep the remaining for spending. That’s the benefit of financial literacy, you can easily make profitable decisions. You won’t be a reckless spender, instead, you will be able to manage your resources and plan well.

2. Financial literacy will prepare you for emergencies (unexpected occurrences). Such occurrences can include sudden job loss, medical emergencies, destruction of house and property, car breakdown, and more. One way to prepare for emergencies includes one of the financial skills I earlier mentioned, which is saving. Saving is really necessary because it gets you prepared for the future. Using my situation as an example, when I had a medical emergency which I talked about in one of my previous posts, the total amount spent was close to half a million naira. My dad was able to come up with several payments and that was because he had savings kept somewhere. Imagine there were no savings at all, just imagine… The experience taught me the importance of saving. A day may come when you will need to attend to big or small emergencies, it’s how financially prepared you are that will help scale you through.

3. Financial literacy improves quality of life. Financial literacy prevents financial struggles, which implies struggles with managing money, which often leads to anxiety, depression, helplessness, and relationship problems. These struggles can be avoided completely if you become financially literate. When you know fully well that you have great plans for your financial future, you get to have peace of mind, which enables you to focus on other aspects of your life that bring you joy and happiness.

4. Financial literacy will make you financially independent. Having control of your money is one of the benefits of being financially independent, hence you can confidently manage your finances. Also, you can decide to make investments without seeking the consent of anyone and then get returns/more money in return. With more money in your account, you do not need to rely on people to survive and purchase certain things you desire.

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Being financially literate is necessary, and not an option!​ You should get to learn about money, regardless of your age and income level. When you do this on time or early enough, you will be better positioned to make smart financial decisions.

How do you become financially literate?

Expose yourself to available resources/materials, such as books, videos, audio, courses, and financial blogs.

Lastly, it is important you understand that the journey to financial literacy is a life-long journey, but every step you take in this journey gives you greater control of your financial future.