Your financial literacy is your ability to make financially smart decisions. Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is now a focus of state-run programs in countries including Australia, Canada, Japan, the United States, and the United Kingdom.
You were not born financially smart or dumb; your financial knowledge or ignorance was developed over a period of time. I assume that you are not ignorant otherwise you would not be reading this.
Understanding basic financial concepts allows people to know how to navigate in the financial system. People with appropriate financial literacy training make better financial decisions and manage money better than those without such training.
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International findings on Financial Literacy
An international OECD study was published in late 2005 analysing financial literacy surveys in OECD countries. A selection of findings included:
- In Australia, 67 percent of respondents indicated that they understood the concept of compound interest, yet when they were asked to solve a problem using the concept only 28 percent had a good level of understanding.
- A British survey found that consumers do not actively seek out financial information. The information they do receive is acquired by chance, for example, by picking up a pamphlet at a bank or having a chance talk with a bank employee.
- A Canadian survey found that respondents considered choosing the right investments to be more stressful than going to the dentist.
- A survey of Korean high-school students showed that they had failing scores—that is, they answered fewer than 60 percent of the questions correctly—on tests designed to measure their ability to choose and manage a credit card, their knowledge about saving and investing for retirement, and their awareness of risk and the importance of insuring against it.
- A survey in the US found that four out of ten American workers are not saving for retirement.
“Yet it is encouraging that the few financial education programmes which have been evaluated have been found to be reasonably effective. Research in the US shows that workers increase their participation in 401(k) plans (a type of retirement plan, with special tax advantages, which allows employees to save and invest for their own retirement) when employers offer financial education programmes, whether in the form of brochures or seminars.”
However, academic analyses of financial education have found no evidence of measurable success at improving participants’ financial well-being.
According to 2014 Asian Development Bank survey, more Mongolians have expanded their financial options, and for instance now compare the interest rates of loans and savings services through the successful launch of the TV drama with focus on the fiscal literacy of poor and non-poor vulnerable households.Given that 80% of Mongolians cited TV as their main source of information, TV serial dramas were identified as the most effective vehicle for messages on financial literacy.
So without further ado, here are ways of gaining financial literacy.
1.Your own experience
There is no better teacher than your own experience but that does not mean you have to go ahead and make all of the mistakes it is possible to make. It is more a case of using your personal judgement based on your knowledge and the advice of others but you will make mistakes along the way; it is a part of the learning process. It is a matter of who are you going to accept advice from and whose advice to treat with a grain of salt.
An excellent way of gaining financial literacy is to register with one or more of the share market online platforms where you are able to buy and sell shares online. Only a minimal amount of money is needed to get involved. In New Zealand sharesies.nz is one such platform but is by no means the only one around. Other countries have similar such share trading platforms available.
2.Experience of others
The easy way to learn is from the mistakes of others. All you need to do is to keep your eyes open; many people do not do this and instead follow others like sheep. This is not necessarily the best way. In fact history has taught me that following the crowd is often the wrong way. A classic example is the share market when a stock is overvalued because so many people have jumped on the bandwagon and bought shares in that particular company because everyone else is doing it. It is young people without experience in the markets who are prone to this mistake.
It pays to go against the crowd; what this means is that you look for bargains in the markets whether it is gold, shares, property, and so forth. You do not have to experience what others are experiencing if you have the ability to assess what is a good investment and what is not.
Be prepared to listen to what the older generation has to say. Many of their opinions will be based on their own experience.
Ignorance is no excuse as far as not being financially educated because your local library will stock books on finance. There are terrific books on finance. Some I recommend are, “Rich Dad Poor Dad,” by Robert T. Kiyosaki with Sharon L. Lechter. They have several other books which are recommended reading. “How to Be Rich & Happy” by Hans Jakobi, Australia’s wealth coach is another book I recommend. Hans also has several other books published, “Underground Knowledge” and “Due Diligence,” are two of them. “Making money made simple” written by Australian financial advisor Noel Whittaker is a good read. Mary Holm and Martin Hawes are other excellent financial authors.
There is a lot of information available online on finance and investing; a simple Google search will bring these up but like listening to your mates you have to use your own judgement when assessing the information from some sites and how it relates to your own personal situation. Martin Hawes and Mary Holm are both reputable advisors with good websites.
Most newspapers carry financial information and these are worth reading. Cut out articles that interest you; they make good reading in a year or so.__________________________________________________________________________ >COPYRIGHT WARNING!!
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