In the past few years, the term “financial literacy” has gained quite a bit of traction. Any term related to the word “financial” had a tendency to be associated with being in a man’s wheelhouse, but this needn’t be the case. 

To begin with, what is financial literacy? Let us take a look at two definitions; the first comes from Investopedia, which defines financial literacy as “the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing”. Financial literacy can also be defined as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of well-being”. (President’s Advisory Council on Financial Literacy)

Financial literacy is considered an essential skill, so much so that in North America it is being incorporated into the school curriculum. This is intended to aid students in making financially sound decisions as they transition into adulthood. In Canada, November has been designated Financial Literacy Month, with the aim to provide basic money management education to Canadians, as well as to dispel money myths.

 

Why it is important to be financially literate

Being financially literate will help you determine, whether to take out a loan, saving and investment strategies to employ for short- or long-term goals, and how to properly manage debt. It is also about understanding the risks associated with different types of financial activities. 

You have probably heard ‘knowledge is power‘. The real power, however, is having the confidence to use the knowledge you have gained. Becoming financially literate gives you the confidence and power to manage your financial resources, be financially secure, and ultimately, attain financial freedom. While money is not the answer to life’s problems, it does provide a means to propel one further and aid in bringing your vision to life. 

Why give control to someone else on a matter that has a direct impact on your well-being?

Some women tend to leave money matters to others, whether it be their partner, parents, or a bank employee, because they do not feel confident about the topic. Why give control to someone else on a matter that has a direct impact on your well-being? This isn’t to say you cannot benefit from the advice of an expert, but blindly taking any advice is never a good thing. Well informed decisions and meaningful discussions can give you the assurance your money is doing what you’d like it to do. Irrespective of age or status, women should seek to gain an understanding of finance so they can be in control of their money if they so choose.

 

Preparing for the future

The life expectancy for both men and women has increased, with women outliving men. Women also tend to be the primary caregiver for their elderly parent(s), and in some cases, this means providing for them financially as well. Life circumstances can change, and change quickly at that – divorce, death, or a sudden illness, are just some of the things one may be faced with, which usually requires substantial amounts of money. Whatever your situation, being financially literate and in charge of your finances will help you find a way forward and face the future with confidence.

 

The leveling of the investment playing field

With technology, money and the ways we invest are rapidly changing. In the past, things were simpler. We used cheques and cash. Very few people carry cash today. Instead, a payment can be made with a simple tap of a mobile device, debit or credit card. Previously, if you wished to save, your options mainly were either a savings or chequing account; only the rich invested in stocks and mutual funds. Now, the stock market is easily accessible to anyone, and there are new financial instruments such as ETFs (Exchange Traded Funds) and cryptocurrencies, such as Bitcoin and Ethereum.

The good news is, with the variety of products now available, it can help you achieve your financial goals more easily and quicker than before. It makes it possible for you to purchase property, have the funds to educate your children (should you choose to have), travel or, to live comfortably when you retire. 

 

Financial health and your physical health

A recurring theme in some definitions is that financial literacy contributes to a person’s well-being. How is that you may ask?

Well, when anyone is able to manage their finances, they are less stressed, which in turn leads to better health outcomes. Even if at present you are not where you wish to be financially, having a plan in place and executing on the plan is a good place to start. Something as small as consistent and incremental contributions to a savings account can set you on a journey to achieving what may have once felt impossible.

Creating a plan can reduce your stress levels, change your outlook on life, and how you interact with others. Lower stress levels tend to lead to more positive interactions. It can also boost energy levels, so you can tackle other aspects of your life. 

 

Becoming more financially literate

So, what can you do today to become more financially literate ? If you are reading this, you have already taken a positive step.  Read more about the different financial concepts you are interested in and/or take a course on finance. Learn how to create a budget and track what your present expenses are. There is always an opportunity to save, do not be discouraged by the amount. It is the consistent action that matters most. Take advantage of the internet, it is a wonderful resource at your disposal. Do whatever works best for you, but start now! 

 

 

Image: freepik