Financial literacy is the way in which one is in a position to manage financial resources using the proper knowledge and skills acquired, thus, promoting financial well being. This appropriate skill includes having a long term vision and goals, appropriate planning and budgeting for the future, this skill is required in day to day activities. People who have understanding about finances, for instance, young people are in a position to take control of their lives in that they are in able to use the money effectively .
Financially literate students obtain the skills and abilities required in order to understand how money works , these include how to make, to use, invest and how to manage money. Inadequate knowledge about finances leads to debt shortcomings for individuals. It has been realized that most of the average youth are financially illiterate.
Financial literacy has lots of benefits. For young people it provides them with savings and budgeting tools. This enables them to manage their expenses and control their debts responsibly. It equips them with the discipline to save for their future, hence, reducing reliance on credit cards and basically on credit services. The discipline to save more and spend less is very important even in their future when they start having families to care for.
Financial illiteracy affects the quality of life at the same time. It develops one’s ability to provide for oneself and the family more so the attitude towards money and investment and the contribution towards the society. Financial literacy ensures that people have a clear understanding of what should be done in order to achieve a financially balanced lifestyle. It also assists entrepreneurs to acquire money from other people for business purposes to make sales and earn profits.
There are several reasons why college students should learn about money in that it will be of great importance. This is because they know very little about how to spend and manage the available resources, thus, they are borrowing and spending not realizing that the interest builds up and they should know that credit cards are not free money. Learning about economics and finance will greatly help students to budget and account for their money in a more appropriate manner, more so, they should practice managing money when they are still young. This will enable them to have acquired the skills that will ensure they have a financially balanced lifestyle.
Many students have more debt options in that most of them are using credit cards to pay for their tuition fees and schoolbooks and other expenses. This will lead to the accumulation of more debt, thus ,by the time they are graduating this means that they acquired more credit in the period they are in college. Providing financial understanding could enable students to avoid credit and, more so, learn about interest rates and how to make clear budgets of their expenses. They would ensure that they have minimal debt by the time they are graduating.
An important aspect for student to understand is that student loans are more costly in that the cost of education has grown and students are taking on more debts when banks are highly increasing their interest rates. Financial literacy will give students a chance to avoid such debt by using alternative ways to acquire finances and learn how to get credits from financial institution charging lower interest rates. This will help them to avoid accumulating debts. With financial illiteracy one would incur several debts thus leading to bankruptcy and a financially imbalanced lifestyle.
Many student normally learn how to save later in life, this happens due to financial illiteracy and less understanding about money and how to save. For instance, it is important for students to learn about saving and how to spend their money when they are still in college; this will equip them with the knowledge on how to save and its importance, giving them an opportunity to save earlier for the future use and to deal with arising emergencies. Furthermore, current governments do not provide boom looming retirement benefits, thus, the next generation will not enjoy them. Due to this, more young people have to save more and invest wisely in order to enjoy the privileges of retirement.
Financial literacy can be improved in the following ways: financial education should be conducted in a fair manner by all the stakeholders and the governments. This will greatly help in reducing the level of illiteracy among the youth more, in particular, students in the higher institutions of learning. Furthermore, it should be started in schools enabling people to acquire relevant knowledge about finance at an earlier age. Financial awareness should be fully supported by financial institutions through good governance whose accountability and responsibility should be encouraged. This will promote the awareness and a better understanding about debt and interest levied, more so, teach people on how to make investment and save, thus, ensuring financial literacy.
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The financial institution should be motivated to ensure that the client gets a clear understanding of the information, mainly when dealing with long term commitment, which incurs a significant financial consequences : a small documentation with few previews should be discouraged in that it does not give the client full understanding of what is about to come across after the commitment. Furthermore, financial awareness programs should clearly state about the essential life planning aspects for instance savings, debt, and pension plans. This will help in providing necessary information which will enable them to budget their finances, hence, this program should motivate towards the financial capacity building.
Finally, national campaigns should be launched on selected websites, where one can easily access relevant information about how to manage and use their finances in an appropriate manner and also receive warning on high risk issues in line with financial consumers. This should be promoted in order make people informed about cases such as fraud so that they can easily avoid and keep away from it.
Sensitization of students about personal finances has not been taken seriously for a long time; even the recent finding proved that most students in college are financially illiterate. Some students have been seen taking part in the financial education program. In order to realize the factors that influence their participation in these programs, this finding is interested in knowing the concern of college students about the financial side of their lives, how they expect their future money utility to be, and how they view personal finance education. Students have needs and interests when it comes to personal education about finances, therefore, making personal finance education more efficient, this should be put into consideration. Furthermore, male students, those who took a course related to finance and those who had been left to manage their own money matters, showed a greater participation in personal finance education. Students from poor backgrounds also showed interest in personal finance education, which will in turn greatly help them to manage their finances.
In conclusion, financial literacy is of great importance to each and every individual, not only students, and towards the economy. This is brought about by the fact that without financial understanding one will not be in a position to make a wise decision in terms of money management and preparing a budget which will give guidance on how to go about daily arising financial matters. Saving is another major issue, which is so critical when it comes to money matters. Learning to save is important in that it gives preparation for any upcoming emergencies requiring attention of money and also for the retirement period and avoiding the stress of being under bankruptcy, thus, living a happy life. Financial knowledge contributes a lot towards the economy, for instance; having many people who do not have any understanding about finances leads to a poor society which in turn lowers the economy, but in the case where most of the people are financially aware about money matters, this is an achievement in the society and the economy in general. This is brought about by the fact that they are in a position to manage their money effectively and making wise investing leading to an improved economy and improved standards of living among the residents of that particular environment. Financial understanding is the road to success and a happy lifetime by ensuring a financially balanced lifestyle.