daniel chigunwe
Dr Kudzanai Vere
According to a recent report on financial literacy by the Standard & Poor, Financial Literacy Around the World, there are only 33 percent adults who are financially literate.
Just imagine.
This tells you a clear story of why we are where we are today. This percentage translates to almost 3.5 billion people only of the entire world population. An understanding of the basic concepts of finance empowers people to make sound financial decisions. As long as you use money, you need to have this basic understanding of finance.
Of all the women in the world only 30 percent are financially literate compared to their male counterparts at 35 percent. It’s within the financial decisions we make that we remain or move out of poverty.
Definition of financial literacy
Financial literacy is the ability to understand and make use of financial concepts and skills and having a mental disposition to apply these in your daily life every time you make a decision related to investment, saving, spending and debt management.
It is a lifelong learning process that helps individuals to build wealth wisely, manage their finances and even debt and plan for a secure future.
Such kind of literacy opens you up to the world of banking, budgeting, saving, credit, debt, and investing as foundational pillars that support most of the financial decisions that you will make in your life.
Let me also hasten to say money is not finance but its part of finance.
In simple terms financial literary is the ability to understand profitable use of finance through financial wisdom.
Financial literacy is the key to making informed financial decisions, managing risks and maximising opportunities associated with different financial products and services while meeting specific financial goals.
Why financial literacy?
Financial literacy is a bridge that leads you to financial independence. I am confident that it’s benefit will encourage individuals to give it the attention it deserves. Below are the benefits of financial literacy.
Financial literacy is an important key to making informed financial decisions, managing risks and maximising opportunities associated with various financial products and services while meeting specific personal or organisational financial goals.
Enhanced money management skills
Knowing when to save or splurge takes a lot of discipline, self-control, and financial knowledge. With improved money management skills, you can make informed decisions about your finances and better control your spending.
You can budget your money, track spending and understand the importance of saving money for future goals.
Reduced debt
Debt management is crucial because it enables you to know how to use credit wisely.
With financial literacy, you can practice using credit responsibly and taking out loans only when necessary. You only spend what you can afford to pay back and make payments on time.
Increased savings
For many people, saving is not a priority because they do not understand its importance. Financial literacy can help you see the value in saving money for emergencies, retirement and other long-term goals.
Better financial decisions
You can create a balance between present living conditions and future financial goals. You weigh the pros and cons in both the short-term and long-term perspective in making financial decisions.
Wise investment
When you understand matters like risk and return, you are able to make informed investment decisions.
This can help you grow your wealth over time and reach your financial goals sooner.
Budgeting skills
Financial literacy teaches you how to create and stick to a structured budget to help track spending, set financial goals and make better decisions about where to allocate your money.
Creating a budget can be daunting, but many resources are available to help you get started. You can find budget templates online or in personal finance books and magazines.
Reduced financial stress
You are less stressed about money because you know how to manage it effectively. Thus, you can lead a higher quality of life. Finance is defined as the management of money and includes activities such as investing, borrowing, lending, budgeting, saving and forecasting.
Conclusion
Financial literacy is the gateway to financial freedom and independence. I will be sharing every week on this issue so that we can be wiser financially and be able to relate to money from an informed standpoint
The writer Dr Kudzanai Vere is a Certified and Practicing Public Accountant, Certified forensic accountant and practitioner. He is the CEO of Kudfort Zimbabwe an accounting and business advisory firm. He continues to impact generations.
Contact Dr Vere on [email protected] or +263719592232
Bongani Ndlovu