Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all their financial resources.
Simply put, being financially literate means that you understand how to manage the money that you have in a thoughtful way. Being financially literate allows you to stay out of debt or manage the debt you have. It also allows you to budget your income so that you can afford your necessities, and build savings for the future.
Below are a few answers to frequently asked questions (FAQs) around financial literacy, and you’ll find a few great resources at the end!
Q. I’ve heard that keeping a balance on your credit card helps to build your credit, is this true?
A. No! Building a balance on your credit card can negatively affect your credit score. You should pay off your balance on time every month to avoid unnecessary interest charges.
Q. What is an easy way for me to begin saving money?
A. Track your expenses! It sounds so simple but most people do not keep an accurate account of their weekly or monthly spending. Keeping an eye on how much you spend and what exactly you spend on- will help you decide what expenses you could possibly cut-out and save on.
Q. What is an Emergency Fund?
A. This is the most important savings account you will ever have! Typically, this is an account where you would house three to six months’ worth of living expenses. You would only use this account for emergencies such as unexpected loss of employment, physical injury that puts you out of work for a few months or even an unexpected death. Establishing multiple types of savings accounts will always do more good than harm.