Why Personal Financial Education is So Important
Despite the critical role that finance plays in all our lives, an astonishing number of people lack even a basic knowledge of personal finance, choosing instead to leave their financial situation – in both the present and future – to chance.
However, it’s critical to your life and the lives of those around you that you give yourself a thorough financial education – using books, finance blogs, podcasts, YouTube videos or other resources – to put yourself in the best position financially both now and in the future.
So, what is personal finance?
In essence, personal finance encompasses an individual’s management of their financial decisions, habits and investments.
This can include managing income streams, budgeting, saving, investing, banking, managing loans and debt, taking out insurance policies and retirement planning, among many other financial behaviours an individual might engage in.
However, many know far less than they should about personal finance and money management and fail to maximise the prosperity of their financial situation as a result.
In contrast, by harnessing the power of financial education, individuals can improve how far their income will stretch and even help increase the income they earn overall.
To persuade you to begin – or continue – your financial education, here are six ways in which being clued up on personal finance can improve both your financial position and your life as a whole.
Financial education enables you to make the most of what you have.
When you aren’t particularly aware of your finances – a.k.a. what’s coming in and what’s going out – it’s likely that you’re haemorrhaging money where you don’t need to.
A good personal finance education shows you where to look to save money, teaches you to budget and live within your means and points to where you may want to direct your money to grow it over time.
It improves your effectiveness at dealing with debt.
Not only does a good education in personal finance teach you how to live within your means and avoid sustaining debt in the first place, but it will improve your ability to deal with the debt you already have/are going to have.
Most of us acquire some form of debt or another at some point in life – whether this is a student loan, a mortgage, or simply overusing our credit card – and paying this debt off as efficiently as possible is key to maximising your financial position.
Not to mention, having a firm handle on debt repayments reduces stress and improves your quality of life.
It prevents you from damaging your credit score.
Having a strong understanding of personal finance and managing your money effectively can help you build a stellar credit score and avoid making mistakes that can cause it to take a hit.
This is essential for long-term financial goals that require you to borrow money, such as acquiring a mortgage to buy a house or a loan to start a business.
You’ll be better able to support your loved ones.
Often, our financial position doesn’t just influence our own lives but those around us, such as our partner, our kids or our parents.
When you thoroughly educate yourself on personal finance, you’re better prepared to be able to save money to take care of your loved ones and – in the case of your family – avoid debt that could negatively affect the quality of life of those around you.
You’ll be able to achieve your financial goals more quickly.
Most of us have financial goals we want to achieve – whether that’s saving money to start a family or buy a house, or put away a certain amount for retirement – and taking the time to learn about personal finance will enable us to plan effectively for how you’re going to get there.
In practice, this will mean that not only are you the most prepared you can be to ensure you meet your financial goals, but you will likely hit them much earlier since you’ll be equipped with the knowledge you need to save as much as possible and hit your financial milestones quicker.
It enables you to safeguard your future.
One of the major financial concerns we contend with as we get older is whether we have enough saved for our golden years to live our later life the way we want to.
Committing to giving yourself a comprehensive personal finance education will allow you to ensure that you’re making the smartest choices possible when it comes to preparing financially for your future so that you’re not scraping by in your later years when you could be living in luxury.
