FINANCIAL LITERACY- Why to start early?, What is its importance?

Financial literacy is the ability to understand and effectively use financial skills. In simple words, it is the ability to manage money.

Why it is so important?
Financial literacy is important because it equips one with the knowledge and skill to manage money effectively.

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Key components of financial literacy

Financial literacy includes many skills. However, the most popular ones are budgeting, managing expenses, paying off debt, and understanding the risk-return trade-off in investment products.

1)The basics of budgeting(planning of how to manage money)

Budgeting is an essential life skill that helps in acquiring financial knowledge for planning and managing money. It is one of the most important components of financial literacy and is necessary to keep a tab on one’s spending habits.

The budgeting process should include:
1. Income (payslips, investments, etc.)
2. Fixed expenses (bills, rent, loan payments, etc.)
3. Other expenses (shopping, travel, etc.)
4. Savings

● One should start tracking their income and expenses on a monthly basis. This will help in segregating necessary and unnecessary expenses.

● It depends upon the person how he created his budget. But the best-known budget known to me is 50 30 20. In which you spend 50 on fixed expenses 20 on savings and the remaining 30 on other expenses.

My viewpoint / conclusion
● This is so underrated in real-life practice. Kids should be aware of this from the beginning so that they make full use of it.

● You should learn about it at any point in time because it’s never too late. It will always give you profit and make your life easy. But starting early has its own benefit.

● Someone can say that don’t have enough money such that they can think about the budget. But according to my even if you earn very little you should apply your own budget to it and it would be helpful for you.

● So, start this at an early age and enjoy the benefit.

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