Financial literacy is the ability to understand and make use of a variety of financial skills, including personal financial management, budgeting, and investing. It also means comprehending certain financial principles and concepts, such as the time value of money, compound interest, managing debt, rule of 72, and financial planning. Achieving financial literacy can help individuals avoid making poor financial decisions and help them become self-sufficient and achieve financial stability. Key steps to attaining financial literacy include learning how to create a budget, track spending, pay off debt, and plan for retirement. Educating yourself on these topics also involves learning how money works, setting and achieving financial goals, becoming aware of unethical/discriminatory financial practices, and managing financial challenges that life throws your array.

Trends in the United States indicate that Americans’ financial literacy is declining. The Financial Industry Regulatory Authority (FINRA) found that only 34% of particpants could answer four out of five questions correctly rthat test a consumers’ knowledge about interest, compounding, inflation, diversification, and bond prices. Making informed financial decisions is more important than ever. It’s clear that financial literacy is a must for making thoughtful and informed decisions, avoiding unnecessary levels of debt, helping family members through these complex decisions, and having adequate income in retirement.