Why is Financial Literacy So Important?

Some of the smartest people on the planet still manage to be financially illiterate and this is not because of a lack of intelligence. Even with an IQ as high as Einstein’s, it would be wrong to assume that just because you excel in your field or trade that you are capable of expertly managing your finances. However, this doesn’t invalidate your intelligence. Rather, this form of illiteracy is a direct result of a lack of skill in financial management. This is generally not your fault, as the United States school system does a poor job teaching the youth of America how to effectively manage their finances.

What is Financial Illiteracy?


The term simply refers to a lack or inability to manage your finances properly. Finances refers to credits and debits or a combination of financial resources altogether. Financial literacy, on the contrary, is the direct opposite of this. It is the unique ability to exercise knowledge in commanding one’s personal, or even impersonal, financial resources.

It may surprise you to learn that a decent number of people are not financially literate. In many countries, the subject of personal finance management is not taught in their school’s curriculum. In the United States, only 17 states teach the subject to young individuals – which serves as the root of the problem. It is the offshoot of a widespread pandemic that has individuals mismanaging their finances and leaving themselves in a lifetime of avoidable debts and financial incapacitation.

Consequences of Financial Illiteracy:

The downside to being financially illiterate can be traffic for not only an individual’s finances, but also their entire life. You need to be able to comprehend how your personal finances work, otherwise the repercussions can be dire. It could mean the difference between a comfortable life and a state of constant struggle and worry. Here are two examples of manifestations of the repercussions of financial illiteracy:

1.     Debts: The first and foremost consequence of financial illiteracy. When you lack the ability to manage funds, you run into debt as a direct result. While debt can be fine if it is managed well, this financial management is not often taught. Ultimately, this results in mismanagement that will lead many individuals getting themselves into debt troubles.

2.     Poor Financial Decisions: A financially illiterate person is incapable of making food financial decisions. Lacking the skill or knowledge necessary to properly scrutinize a financial commitment, much like a large sum of debt or an investment, will eventually lead to negative results due to poor decision making.

How to Gain Financial Literacy:

The need to cure financial illiteracy cannot be overemphasized. It is a tragic flaw in many individuals that needs to be nipped in the bud. The consequences can be quite grave, and its effect is global. Many individuals who work in finance, and even some non-financial, institutions need to gain a decent education in financial literacy if they want to be successful. Some of the ways to do this include:

1.     The Internet: When available, the internet is open to all. You can learn about how to improve decision making when it concerns matters of finance by searching for answers on the internet. People of all ages, color, and backgrounds can access the internet these days. It is the quickest way to solve almost problem, including financial illiteracy. The information is abundant and usually free, but you have to do your research and make sure that what you are reading is right. You can get a lot of information on financial literacy here on our site.

2.     Financial Training Programs. There are easily accessible institutions that help to teach and properly educate individuals and even families on financial literacy. These programs have been structured to teach the basics of financial management. Individuals that partake in such training programs get to acquire knowledge on the importance of having good credit, how to save, banking, and a host of other staple financial topics. Local colleges teach some of these programs and you can even find courses online at places like this website.

3.     Books: One of the best and oldest sources of knowledge is books. There are many books that can teach you how to be financially literate and thrive. Some of my favorite choices for this include Rich Dad Poor Dad and The Total Money Makeover. These days, you don’t even have to set time aside to read these books. You can listen to them on sites like audible wherever you are.

Bottom Line

Financial illiteracy is an epidemic of sorts that has left not only individuals in a crisis, but also companies and nations across the world. With finances not well understood, whole economies can be affected by poor financial management. Many times, the difference between a successful person and an unsuccessful person is their ability to make healthy financial decisions. This can only be achieved when one makes an effort to gain financial literacy. Audible Gift Memberships , and use one of those on the book above and you can learn more about how to increase your financial literacy.


One thought on “Why is Financial Literacy So Important?

  1. ONE OF THE GREATEST POST I HAVE READ. ALL YOUNG ADULTS SHOULD READ AND BE EDUCATED ON THIS TOPIC. This should be a requirement for all students before graduating from high school. Thank you for your post.😊


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