Need to know about the importance of loans and financial literacy? You have never been taking loans seriously? Don’t care when banks would call you up and try to sell you on a credit card, or personal loan?
You weren’t looking to buy a car or a house, so what is the point? Having knowledge about loans and finance matters. Don’t wait until you decide to open up a small business loan to start taking a serious look at money, loans, and finances.
Read along with me to find out the importance of loans and financial literacy.
What are loan and financial literacy?
Loan and financial literacy are important for everyone. It encompasses a general awareness of money matters and financial decision-making that affects you, your family, and your community.
Everything you need to know about the importance of loans and financial literacy
Loan and financial literacy are the keys to financial empowerment. Yet many people are not financially literate. Financial literacy is important not just for individuals, but for our country as a whole.
We should make this a requirement instead of an elective subject in high school. People need to focus on financial literacy courses as much or even more than they focus on driver’s education courses when they are young.
Also, in an age where most people have to pay for their own education, debt is almost always a factor. Some students graduate with exorbitant amounts of debt or loans that they might not even be able to repay until after they are finished with college and have started working.
I guess equipping yourself with the knowledge of how the loan and finance system work, will be of great benefit.
Importance of loan and financial literacy
Good loan and financial literacy are vital to any person’s protection, security, and well-being. But with building positive loan repayment and financial habits, and understanding the numbers and not just the theory, matters a lot. The following are the importance:
- Loan and financial literacy will help you develop important money skills for life, understand your credit score, day-to-day cash flow, and how to save and invest money.
- When faced with financial problems or choosing the right debt products, you will be equipped with the savvy, knowledge, and self-confidence needed to deal with them effectively and positively.
- No matter your occupation, one thing is true, you need to manage your money at some point. Therefore, it helps in money management.
- Whether you are a college student looking to pay down student loans, knowledge of loans and finance is needed.
- Looking to save for a home or even further in the future, I guess once in a while, take loans, so you need to know how it works
- If you have a retirement account, having some level of loan and financial literacy under your belt is important. This is especially true now that you can literally conduct your life and finances with a cell phone.
- It is easy for people to make mistakes with their money, loans, and finances, where even simple actions like misreading an invoice can cost you thousands. So watch out and learn all it takes to avoid making mistakes a second time.
- With the knowledge of loans and finance, you will find out that inflation has not been as positive as it appears at first sight. Most times inflation and other factors might affect your finances and force you to take loans.
How to get be loan and financial literate
Where can you start from? With regards to understanding loans and personal finance, to start gaining the knowledge, start from:
- Knowing the basics of loans and finance.
- This can be followed by understanding the basics of credit scores, debts products, and investment strategies.
- This can also be followed by gaining insight on how to manage credit scores, knowing about debts consolidation, and how to manage money as a whole.
- Get links from reliable sources online and offline, which can help you in getting started with understanding personal loans and finances.
What loan and financial literacy is not?
Loan and financial literacy does not just mean knowing how to sign a cheque or filling in the right paperwork for getting a loan. It is about knowing the basics of money.
How banks work, how financial markets function, and so on. Our ability to make sound economic decisions depends significantly on the level of our education and knowledge.
Tips on knowing that you are loan and financially literate
Loan and financial literacy can include but are not limited to:
- Understanding and knowing the importance of how to budget one’s finances to avoid taking loans.
- Having deep knowledge of savings and investments.
- Knowing the basics of the credit system, debt products, and debt repayment
- Understanding the basics of laws that govern finance
- Have a basic understanding of your income, expenses, and savings, ready for emergencies and retirement.
- Understanding what outstanding debts, assets, and other basic financial health indicators mean
- Knowing the basics of taxes and their elements
- The basic understanding of inflation, profit, loss, growth, de-growth, appreciation, and depreciation.
This article exposes everything you need to know about the importance of loans and financial literacy. Since money and its need is indispensable, it is recommended you reflect upon the importance of loan and financial literacy.
Unfortunately, most of the formal education systems across the world skip this essential part of education. It is hence easy to say that you need to focus on working towards being loan and financially literate.