Financial Literacy


Financial Literacy

People love money so much that a lot of them die with a lot of savings in the bank. They have worked hard to earn it all their lives. They cut corners to save it. They never really spent it. Do you know there is $1.5 billion lying in unclaimed monies in Australia as of 2021?

Who does this money belong to??

People who have not claimed it in more than 7 years, many of them may be dead, forgotten, moved countries etc. and many others may have no inheritors. Why did they save so much money if there was no way they could spend it or pass it to another generation?

People leave money in banks as leaving money in the bank makes them feel better, a handful of them believe that they are scared that they may run out of money if they start spending or they do not want to spend money even when retired because once the money is spent it cannot be recovered.

 I’m curious to ask you an unpopular question, why do you earn money if you cannot spend it?

What if someone told you that you can save money effortlessly without being frugal??

My name is Pooja and I live in a developed country, but the matter of fact is only 33% of adults worldwide are financially literate. This means that around 3.5 billion adults globally have a fundamental understanding of saving, investing, retiring, budgeting, and debt.

Rest of the population lack an understanding of basic financial concepts meaning they save up to 0 to 10% of their earnings and support and the most recent stats from 31 January 2022 shows $2billion in debt collection only in Australia.

There are so many Australians who contribute to unclaimed monies and debts. Means either we are overspending or over saving.

Why don’t we know how to handle our money better?

In schools we are taught the cost price, selling price, we were taught about simple interest and compound interest to sum up financial literacy. We know theories but not the application, we are taught calculations but not how to make decisions related to money matters. We take money related calls every day, we don’t calculate the area of the triangle or value of X but we certainly have financial calculations to make every day. In countries like the US 38% of households have credit card debts, and 33% have saved 0$ for retirement.

The lack of financial literacy is a global problem and requires a fix.

  1. Stop Going to family or friends for personal finance tips instead hire a money coach or have a conversation with who is ahead of you.
  2. Fix the Basics: Educate yourself on personal finance, follow a blog, listen to a podcast, or read a book.
  3. Set up short-term, Mid- and Long-term financial goals
  4. Stop getting comfortable with debt: Many students take loans at a higher interest for education, and they fail to save, take credit cards to meet their needs, and get trapped into a cycle of borrowing and paying off into a habit of debt.

The basics are alien to even millennials, it’s hard for people to determine their income, set realistic saving goals, track progress, 72% of the population is unaware of how much to put aside or invest in order to gain financial freedom. Even 51% of millennials say their level of personal finance knowledge is holding them back from making better decisions.

Benefits of financial literacy:

  1. It helps you make that progress.
  2. It helps you maintain a healthy credit score in many countries. Credit score is not only used to lend you money, rent an apartment but also recruiters check your credit score to offer you employment.
  3. It can help you have a better standard of living and maintain it.
  4. It can help you retire peacefully: The estimate says you need at least $1million to retire comfortably, this is if you want to live without working for 30 years.
  5. It can help you make smart investments without having to be frugal.

The key to a good life is not to save aimlessly, it’s about smart investments.

Steps you can take towards a good life:

  1. Protect your assets: If you are worried about the future medical expenses take life- term insurance which includes medical cover, check, and combine your Super, take health insurance, income protection insurance.
  2. Start investing early: Remember the power of compound interest, don’t wait for the right time and amount to invest. In investing the mantra is “Today is the right time to start investing.”
  3. Diversify your portfolio: Don’t keep all the eggs in a same basket, make a portfolio with diversified investments
  4. Divide your goals into short term, mid and long term

This is just the tip of the iceberg. Financial literacy is a subject that we must dive deep into and now is the time to start. We all have heard stories about COVID victims leaving behind a pile of debts, many have mortgages. Financial literacy can help avoid such a crisis.

Learn to manage your mind and money to build wealth and secure your tomorrow without compromising.

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