What's the first thing that comes to your mind when it comes to important life skills? For many people, this may be related to a job or daily task (such as cooking or cleaning). However, I would like to suggest another important life skill that everyone should acquire is financial literacy.
What is financial literacy and why is it important? This webpage explains what financial literacy is, why it's important, and how to improve your financial management skills.
What is Financial Literacy? One definition of financial literacy is "the ability to understand and effectively use a variety of financial technologies, including personal financial management, budgeting, and investing."
Another view of financial literacy is similar to reading literacy, but for finance. The stronger your literacy skills, the easier it will be for you to interpret financial documents or topics and understand their meaning.
So why is financial literacy so important? Why do you need to be able to “read” and understand the more complex things related to finance?
Your credit score is a general indicator of how credit bureaus consider you to be a “good” debtor. The higher your score, the more likely you are to pay off your debt. On the other hand, a lower credit score means lenders are more likely to think you're too risky to lend money. At least not without a set of conditions to maximize short-term gains. (e.g. high interest rates, large advance payments, etc.)
Bad credit can even impact a person’s ability to find a good job—you can’t get fired for having bad credit, but an employer could decide not to hire you based on a low credit score or excessive debt. This, in turn, can make it harder to earn enough money to pay off debt.
Having knowledge of the factors that affect your credit score and how to build good credit can be a life-saver when it comes time to apply for a mortgage, auto loan, or other financial services—since creditors will be more willing to offer favourable terms to people with good credit.
For the benefit of ourselves and our children, it’s vital for everyone to make credit-related educational content and outreach efforts a priority.
That's why we are working on initiatives to increase awareness and overall financial literacy in America, by offering other services.
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