Surely, at some point in your school life, you’ve been given money for your allowance, right? The glamour of having instant money gives you instant opportunities, albeit limited.
But what if that’s the only money you have for the entire week and it will take you another week to replenish it? Have you ever taken into account where that money came from? How hard did your parents work for it?
Sure, keeping your savings each time can help you prepare for the future but have you ever thought about spending it on something that can help that money grow and keep you financially stable or letting it grow on its own?
But get this: the glamour and allure of having to spend as much as you want isn’t as appealing as it seems and you’ll have to cough up what you paid for sooner or later. And if you ignore this, the interest accumulates, so you have to pay a higher amount than what was due to you.
All because you haven’t really been informed about the hidden charges behind credit cards.
This is where financial literacy comes in.
What is Financial Literacy?
Being literate means having a basic knowledge of reading and writing a word or two. Combining that with finance means you are able to understand how basic financial transactions work, which enables you to create more financially-responsible decisions such as learning how to manage your expenses, knowing how the economy works, and getting involved in everything related to money matters.
So how is financial literacy important to someone as young as you are, you ask?
It teaches you how to plan ahead.
Being financially literate teaches you the benefits of setting aside a portion of your hard-earned cash for the future, such as investing a certain portion of your income to the right retirement plan or simply living within your means, for example. As a result, knowing where to put your money teaches you how to become more decisive.
It makes you future-ready.
Because financial literacy teaches you how to plan for your future, you get to save a great deal of your income for the future, which, in turn, will help you become more aware of what to expect once you’ve retired. Retirement plans are important to take note and knowing how to keep yourself financially afloat by keeping in mind where to invest and continuing to generate income outside your regular job can help you survive in the economy.
It encourages informed decision-making.
Are you frequently tempted to purchase everything that you see? Just because something’s on sale doesn’t mean you automatically get a bargain out of what you purchase! Being financially literate teaches you how to not be easily persuaded by the prices that you see.
It introduces you to budgeting and investment options.
So you’ve got, say, a thousand pesos as your allowance this week. The temptation to spend it all on a dress, a trip, or an expensive meal is real. But once you spend it all, you won’t get any of it back. So the wisest option would be to know where to invest your money in order to keep the cash flowing and get your money’s worth in something.
It’s the same as saving money for a car you’ve been planning to get. The value of a new vehicle depreciates as soon as you take it out of the showroom, so investing in the fanciest brand new car isn’t always a good buy as many would say it is.
It keeps you well-informed about where your money goes.
Are you thinking of opening up a bank account? Each bank has its own benefits for those who are applying for an account in their branches, and you get a tiny interest rate depending on the amount you’ve invested every year. Sounds appealing, right? Earning 0.1% is a pretty small amount and by the end of the day, it’s not enough for you to earn. And if the bank you chose happens to close down, you might have to say goodbye to your savings, so staying informed about where your money goes will help you avoid future pitfalls.
So do you feel like taking a business or an economics course now so you can learn more about financial literacy? And while we’re at it, why not pick a scholarship that can also help you save on expenses and plan ahead? Aside from learning more financial literacy tips on our Grown-up Guide blog, learn more about the different schools that offer business schools at Edukasyon.ph!