Financial literacy refers to the knowledge, understanding, and application of several financing tasks and skills. These include budgeting, investments, money management, accounting, saving, debt, and more. Many people believe that individuals become financially literate through their experiences rather than being taught and encouraged about the concept. While experiences do matter, education also plays a highly integral role in teaching and instilling financial literacy amongst students from a young age.
Learning about financial literacy from a young age can make individuals more aware and cautious about their future decisions. It also triggers effective money management and debt, less financial stress, and better financial decisions. Several experts also argue that financial literacy is the pathway to a happy, satisfied, and more financially stable life.
Textbook knowledge might not be enough to teach you everything about personal finances. Still, it is essential to get you started on your future financial plans. Here are a few ways how education can teach you about financial literacy.
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One of the most vital lessons you learn during your higher education tenure is the importance of budgeting. Budgeting is a way of life. And it not only helps you keep an eye on the price fluctuations but also ensures you don’t overspend on unnecessary items or services. Budgeting also helps prepare for emergencies, sheds light on bad spending habits, rebuilds your credit, and gets you out of debt.
However, you need to have proper and apt knowledge before you start allotting your budget because it requires a considerable amount of effort. And this is where education counts. If you pursue higher degree programs, you will find the task much easier since you’ll be aware of the tricks of the trade. For instance, those who earn an MBA degree in Applied Finance hone essential financial and accounting skills that enable them to navigate budgeting and other financial aspects expertly.
Similar to budgeting, another highly essential thing you learn during your university and college days is the importance of saving. Saving a specific percentage of your total income is necessary and an excellent habit. Savings aren’t only a great help during emergencies, but they are also crucial for your satisfaction and future security. Not only that, but savings often also provide seed money to invest and earn higher returns.
But before you dive into saving a specific amount, you must learn about different saving methods and pick one that suits your requirements. A classroom might not be the first place you hear about savings, but it is the first place you learn the concept and its application. Today, colleges offer courses to teach students about savings, especially in the business domain. They help you learn several techniques about how much, when, and what to save.
Debt is horrifying and life-long stress that no one wants. Repayments can be a nightmare, mainly if something unexpected occurs in the midst; the current Pandemic would be an excellent example of this case. So many people had to shut down their businesses due to lockdowns and restrictions and found it immensely challenging to repay the entire indebted amount. However, many people still become indebted to others and cannot come out of the spiral. These are usually the ones who are unaware of the dangers of debt.
If you are a finance student, one of the first things you’ll learn in your degree is how potentially harmful some debts can be personally and economically. Student loan debt isn’t challenging to pay off since your repayments reflect your current earnings. However, other debts such as credit card pending balance, bank loan repayment, etc., create the real horrors. These debts usually come with astronomically high-interest rates, and hence, you must avoid them as much as possible.
Higher education indeed teaches you many life lessons, and one of the most crucial is staying away from such debt. You learn alternative ways of raising money, especially for unavoidable debt.
Higher education gives you a clear idea about what you would want to pursue in the future. The best part is that you keep learning new and different things throughout your degree.
Many people invest their lifelong savings in commencing a business. If the startup fails, they lose its money and confidence. Colleges and universities can guide and teach you the right way to start your business. Apart from teachers, mentors, and professors, you can consult your college’s career counselor. This way, you’ll get advice on the best way to save money if your business collapses.
Your career and plans affect your financial literacy to a significant extent. You must learn the correct way to invest your money in any project to earn profitable returns.
Learning about financial literacy is necessary because money touches everything. So, you must have money to fulfill even the smallest of your needs. Suppose you don’t possess sufficient financial knowledge. In that case, you might have to suffer painful consequences in the future, such as severe indebtedness and even unemployment. Financial literacy leads to a healthier, happier life. It helps get rid of stress and ensures contentedness in your plans.
Undoubtedly, there is no place better for young people to learn about financial literacy than higher education institutes. The manner, style, and technique college professors and guiders use are unmatchable.