- Yin Yan Teo
Reasons Why Financial Literacy is Important
Despite the huge role that money plays in our life, many consumers have little understanding of finances and how credit works. This leads to poor financial decisions which can go on for many years.
Meanwhile, credit card companies, banks, and other financial institutions are bombarding us with various complicated plans and credit opportunities. As such, without the proper knowledge, it is easy to get into financial trouble.
Financial planning is long term, and we cannot just depend on one-time windfalls or one passive income alone. Instead, we advise individuals to increase their financial knowledge to manage their day-to-day finances while also being able to have a better financial plan for the future.
Trends Making Financial Literacy More Important
Financial decision-making is getting more complicated for us. Here are some reasons as to why it is important for you to make thoughtful and informed decisions when managing your finances.
1. We As Consumers Are Shouldering More Financial Decisions
Retirement planning is an example of the increasing responsibility we must take for our own financial security. In the past, individuals depended on company pension plans to fund the bulk of their retirement. These pension funds are often managed by professionals, placing the financial burden on the companies or governments that sponsored them.
As a result, consumers were not involved with the decision-making, rarely even contributed to their own funds, and were not aware of the funding status or investments held by the pension.
Today, pensions are more a rarity than the norm, especially for new workers. As such, consumers need to be financially savvy to better manage their retirement plans.
2. Savings and Investment Options are More Complex
Consumers are now also often asked to choose from various investment and savings products. These products are more sophisticated than they were in the past, requiring consumers to select from different options that offer varying interest rates and decisions they may not always be the best educated to make.
The number of institutions offering products and services can also be daunting. Banks, credit unions, insurance firms, credit card companies and more are all vying for our assets and attention, creating more confusion for us.
3. The Financial Environment is Changing
The financial landscape is now more dynamic than ever as it has grown to become a global marketplace. It now has many more participants and many more influencing factors. The quickly changing environment created by technological advances, such as electronic trading, makes financial markets even swifter and more volatile. Taken together, these factors can cause conflicting views and difficulty in creating, implementing, and following a financial roadmap.
Why Financial Literacy Matters
Financial literacy is crucial for helping us to manage these factors and save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy.
Low financial literacy has left many individuals unprepared for rainy days.
Advice From Double Ace Associates
Any improvement in financial literacy will have a profound impact on you and your ability to provide for your future. Recent trends are making it all the more important that you understand basic finances because you are being asked to shoulder more of the burden of investment decisions in your retirement accounts, all while having to figure out more complex financial products and options. Becoming financially literate is not easy, however you can engage our debt counsellors where we can educate you on financial literacy and financial planning. When mastered, it can ease life’s burdens tremendously.