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Financial Literacy
Financial literacy is the ability to read, understand, manage, analyze, and communicate about one’s personal financial conditions. It includes the knowledge of various financial options available regarding matters like investment choices, retirement plans, ways to manage day-to-day finances and so forth. A person who is financially literate is able to make wise and discerning choices on how to manage one’s own money. On the other hand, a financially illiterate person does not know his or her options about ways to manage and invest personal finance.
Financial literacy is about giving people the freedom to make educated and wise choices regarding their personal finances in order to be free of debt and the hassle and headache that come with it. It is also increasing the opportunities for people to enjoy and reap the benefits of their hard-earned money. Financial literacy does not happen overnight. It takes time to learn about different investment options, payment plans, and retirement funds. There are different factors that will influence your choice of investment. Some of these factors are age, career, risk tolerance, the market performance and more.
Someone once said that financial literacy is not just about knowing how to balance a checkbook and use a credit card. It is about using your money and making it work for you.
Recent studies have shown that in general the US population is financially illiterate despite governmental and private efforts to increase investor financial education. A very important component against fraud is investor education. Without doubt, investors who lack basic financial education are subject to making poor choices. For instance, a financially literate person may start off with $1000 in his or her pocket and end up with $10,000 more as a result. Those who are illiterate may walk away with less money or end up incurring more debt. The difference between the two types is simply in their knowledge of finance.
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