Why Financial Literacy Is Important For Youth in 2024

  • Updated on: 21 Jun 2024
  • Published on: 12 Aug 2021
Why Financial Literacy Is Important For Youth in 2024

Financial literacy is a fundamental life skill that has a direct impact on your well-being. Knowing the importance of financial literacy and taking proactive steps towards it can be beneficial. This helps today’s youth take better control over their finances, enabling them to overcome financial challenges. 

When they’re financially literate, they understand how to allocate their money to several goals simultaneously. Taught early, fundamentals, such as money management, savings, investment, and debt management build a solid basis for good financial habits. 

Youth is a period when unique and creative thoughts and ideas emerge, shaping the society and nation we live in. But are they adequately prepared with the tools necessary to influence the future? Enhancing their financial literacy by encouraging them can help them significantly. 

What is the Significance of Financial Literacy?

A working population, with the majority being young people, can contribute to the economy and dictate the country’s growth points to a bright future. However, a quick survey on the floor will reveal that nearly every young person is concerned about money. 

It is well acknowledged that most young people are woefully unprepared to secure their current and future financial security. So, will they be able to prepare? 

This is only feasible if they start learning about saving, debt, taxation, and the foundations of banking, insurance, and debt management from a young age. They generally learn about money through informal socialising, such as seeing and listening to their caretakers, important adults, and classmates. 

They’re not routinely exposed to formal financial education. Our educational system lacks institutional frameworks, such as a classroom curriculum or other courses on:

  • Saving
  • Spending
  • Allowances
  • Focusing on short-term goals to achieve long-term goals

This makes it critical to take proactive steps towards financial literacy.

Importance of Financial Literacy

Here’s why being financially literate is beneficial:

  • Empowers you to achieve your financial goals on time
  • Safeguards you against making wrong errors that can lead to financial crisis
  • Equips you to navigate financial emergencies effectively
  • Instils confidence in financial decision-making
  • Aids in identifying fake schemes and avoiding financial fraud
  • Facilitates retirement planning
  • Encourages you to make the right decisions and avoid herd mentality

How Can Financial Literacy Help Youth

Without financial literacy, the actions and decisions you make (or do not make) regarding savings and investments would be based on shaky ground. Financial literacy is a thorough understanding of the methods that are essential for financial growth and success.

  • Investing

Rather than keeping money idle in a bank account, you can invest in financial products. Millennials must understand – investing is all about creating and developing wealth so that you can live a secure and happy life. It’s all about investing in a strategy that will help you earn substantial profits over time.

  • Defending Against Debt and Bankruptcy

Creating an emergency savings account that can help in a disaster is critical to avoid debt accumulation. To prevent bankruptcy, a financially-savvy individual understands how much to save aside. 

Ideally, it should be three to six months’ worth of expenses and it should be preserved at that level at all times. Of course, they should also know about emergency loans.

  • Savings 

Keeping money aside provides financial stability, a secure present, along with a financially solid future. With strong financial planning, you can easily build a corpus for future. It is possible to save money by assessing your spending habits.

  • Saving for Retirement

Saving for retirement while achieving short-term objectives is a sign of financial literacy. It helps you figure out how much to save, what kind of retirement life you want, and how to get there.

  • Paying Off All Debts  

Only those who are already in debt understand the agony of being trapped in debts. Financial literacy can assist young people in determining the most effective ways to get out of debt, whether on their own or with the assistance of a respected professional.

  • Understanding the Cost of Living

Making a budget is a crucial part of developing financial literacy since it allows you to have a genuine knowledge of your income and spending. Once a budget is established, you can use it to manage your finances and minimise needless expenditures. 

By keeping these points in mind, young individuals can plan their finances better. In this manner, they can also enhance their savings and build a corpus for the future. When it comes to budgeting, the golden rule is that revenue must exceed spending.

Understanding the components of financial literacy can help one enhance their financial knowledge. They can then set and work toward financial objectives that complement their vision for a happy life. 

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FAQs on Why Financial Literacy is Important

How can I enhance my financial literacy?

You can boost your financial literacy through these ways:

  • Reading about financial concepts
  • Taking part in financial education camps
  • Using financial management tools
  • Assessing and managing your own finances
  • Getting professional assistance

What are the 5 basic principles of financial literacy?

Here are the primary principles:

  • Earn
  • Save and invest
  • Protect
  • Spend
  • Borrow

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