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Financial literacy is a key part of life. And the sooner you learn how money works and how to make it work well for you, the more successful and confident you’ll be with your finances later.
It’s never too late to learn financial literacy skills, but it certainly pays to have a head start. Your first step? Arming yourself with education. We show you how to get started.
What Is Financial Literacy, and Why Is It Important?
Financial literacy is the understanding of concepts such as budgeting, saving, investing and managing debt, which can give you an overall feeling of trust in your ability to handle your financial well-being. The goal of financial literacy is to give you a sense of control over your finances so you can use money as a tool to make choices that increase your satisfaction with life.
Being financially literate is important because it can help you feel better equipped to handle financial problems that may arise throughout your life. It’s also key to helping you avoid unnecessary debt and have adequate retirement income.
How To Educate Yourself About Financial Literacy Topics
To further educate yourself on financial literacy, it’s essential to understand:
- How to make the most of your money: Thoroughly research financial products to make sure the product is a good fit for you and will help you achieve your financial goals. This even includes basic financial products, such as checking accounts and savings accounts.
- How to set and achieve financial goals: No matter how big or small your goals are, financial planning will help you achieve them. It’s also important to understand how to stick with your goals, such as by automating your savings contributions and periodically reviewing your finances.
- How to manage financial challenges: Whether it’s paying off your debts or making it through a recession, it’s essential to understand how to make it through challenges with your finances as intact as possible.
To help you learn more about the above topics, it’s also essential to work with a supportive credit union or bank — such as 7 17 Credit Union — that provides plenty of financial education resources.
An Introduction To Navigating Credit Unions and Banks
Generally, the first financial account you’ll open is a checking account or savings account, which means you need to know how to navigate the world of credit unions and banks. Checking and savings accounts store and help you build the funds you’ll need for daily spending, large purchases and life events.
Many institutions require you to have a checking account to make a purchase, especially a larger one. A checking account is essential for:
- Using a debit or credit card
- Utilizing payment apps, such as Venmo
- Writing checks
- Using an ATM
- Purchasing or renting a home or apartment
- Receiving your paycheck
- Paying bills online
Some financial institutions have a physical presence. Many brick-and-mortar financial institutions also have an online presence, so you may not need to ever visit the physical location. Other banks offer online-only services. These banks don’t have a physical location you visit, but they offer the same services as brick-and-mortar banks.
How To Develop Financial Planning Skills
Financial planning involves assessing your current financial situation and developing a plan for how to reach your short- and long-term goals. A financial plan is an ongoing process, and similarly, developing your financial planning skills will be an ongoing process.
You may create a financial plan on your own. Or, if you’re not sure where to get started or your finances are complex, you may want to receive assistance from a financial planning professional.
The basics of financial planning involve taking a comprehensive look at your finances — specifically your goals, cash flow, savings, insurance and other elements. We understand that this can be overwhelming, so a good strategy to implement when you’re starting your financial plan is to break the plan into smaller, more manageable parts:
- Set a concrete, realistic goal that you’re saving toward and when you want to achieve it.
- Set a budget and determine what you can set aside toward your goals.
- Make sure your checking account is the right fit for you.
- Tackle your debts by paying them off one by one.
- Create an emergency fund in your savings with at least 3-6 months’ worth of expenses.
Budgeting 101
Budgeting can be one of the hardest financial skills to master, but it’s an essential one because it helps you keep track of money going in and out. To set a budget, determine your income and then list all of your fixed expenses (those that don’t change), flexible expenses (those that change from month to month, such as groceries) and discretionary expenses (those that aren’t necessary for survival, such as dining out or new clothing).
Add up your expenses and subtract them from your monthly income. If your expenses are less than your income, you’re in the clear! If your expenses are more than your income, you’ll want to take another look to determine where to prioritize and cut.
Your Next Step in Financial Wellness
Arming yourself with knowledge is key to supporting your long-term financial health. At 7 17 Credit Union, we have plenty of resources to help support your financial wellness, including free advice from financial coaches, interactive tools and more. Check out the free financial education and coaching resources available to our members today.
