Investing Basics: What Is Financial Literacy?

Posted on February 21, 2018 at 11:54 AM PDT by

Financial literacy is a solid understanding of finance in ordinary life.

Financial literacy can be as simple as grasping the value of a dollar as a youngster and as complex as long-term investing as an adult.

True financial literacy means understanding of one’s place in the broader world of money, investing, saving, taxation and debt.

financial literacy

Financial literacy relates to one’s overall sense of financial well-being. It does not mean you need to have an advanced degree in finance, economics or a related topic.

Rather, it better describes an individual who has achieved a level of comfort with their personal finances.

Ideally, the process of financial literacy starts at a very young age. Parents can share their money values, including thoughts on saving, spending, and gifting.

Financial education should continue through later years of school. Topics might include the importance of savings, the time value of money, proper use of credit and the role of the banking system in society.

This often is a time when planning for higher education occurs.

Parents and students can build on the subject by talking about how to finance that education, with the student likely taking on summer work and thus personally learning how hard work relates to money!

Family finances

Learning about the role of finance in society should continue for adults, too.

This requires education and can lead to seeking advice on family finances and topics such as risk, cash-flow planning, investments, taxes and estate planning.

Adults often are challenged with navigating through myriad sources of financial information, accurate or otherwise, available to them through the media.

Financial literacy can be enhanced by taking classes, attending seminars and workshops or by self-directed reading.

A good advisor helps build financial literacy by educating clients on topics as needed to address their specific financial goals.

MarketRiders, Inc. is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.