Financial literacy isn’t about knowing everything. It’s about knowing what will protect your money. I know, “the bank protects my money”. But it doesn’t. The bank takes your money, pays you lousy interest, and then lends your money to other people and charges them outrageous interest.
Being financially literate is more important than having a budget. It’s more important than living cheap, than having a savings plan.
Do you know what the fees of your checking account are, how much money you spend every month, how to buy stocks, how to calculate compounded interest? All of these things are critical to to making good decisions about your money. When you can make good decisions independently, you are financially literate.
Everyone needs to make good financial decisions. You have to keep your banker/broker/agent honest, and the only way is to know a good deal from a bad one. Bad financial decisions cost normal people thousands of dollars. It’s better to make good decisions and knowingly spend hundreds on beer and cocktails, than make terrible decisions and have to cut out everything fun in your life.
There are a lot of companies that pretend to help you make decent decisions. Please understand that banks exist to make money. Same with investment bankers, brokers, financial planners, accountants, real estate agents, credit card companies. Especially credit card companies. They don’t exist to help you. They exist to make money.
The good news is, some are better than others, you just have to make the right choices.
Read this book: “I Will Teach you to be Rich”, by Ramit Sethi. I know, it sounds like the kitschy pyramid scheme, but it’s an excellent book on all that crap you need to know about dealing with money. It’s less than $10 on amazon. Or for the uber cheap, like me, check out your local library.
Here’s some ideas of what you need to know and do:
When you know the answers to these questions, or at least, how to find them, you’re well on you way to being financially literate. Remember that these decisions aren’t to be passed off to an adviser. It’s your money, you need to decide how to save it and spend it.