The Importance of Financial Literacy

by Collin LeGall, CIRP, LIT
September 30, 2021

What is financial literacy anyway? It is an understanding of concepts including saving, investing and debt that leads to an overall sense of financial well-being. With knowledge you set yourself up to earn and manage your money in a way that means you run your finances instead of letting them run you. 

British biologist Julian Huxley said, “We all know how the size of sums of money appears to vary in a remarkable way according as they are being paid in or paid out.”  A banker will tell you, “We are pleased to offer you a $5,000 line of credit.”  The bank will earn, say, 7% interest that you’ll be paying.  And when they tell us they’ll pay us, say, 1% interest on $5,000 we have to invest with them, how does that make you feel?  When it comes to borrowing, saving and investing, research, seek advice and shop around for options and rates. It’s a competitive market. Doing the work beforehand can mean substantial differences in terms of the cost of borrowing, financial returns and your peace of mind.

We all need money. If you have a chicken and I have a cow, I can give you a fair exchange of milk for your eggs. But if you’re lactose intolerant, you won’t take my milk for the eggs. So what do we do? We use money; it’s a common denominator so we can get the things we need and want. Handling it properly is the key.

When you understand the basics about saving money – how to do it, where to save it, the pros and cons of the various investing options – you’re more likely to make it a priority. And having savings can certainly help you to sleep nights, knowing there’s a cushion to fall back on when things get challenging.

Debt has serious costs and consequences. Many don’t look into the true cost of borrowing.  They don’t ask questions about what happens if they don’t follow through with paying it back.  They also don’t understand how quickly interest can add up.  Researching, seeking wise counsel, and asking questions can all help to keep your costs down.  With that kind of information, you may choose to save up for the purchase instead of financing it.  Exercising self-restraint and delayed gratification can save hundreds, even thousands of dollars in the long run.

Is financial literacy important? It sure is. Get informed. If you don’t pay attention to your financial well-being, you’ll be hard pressed to find someone who will do it for you.

If you are experiencing difficulty with your finances and would like help to gain financial literacy, please contact a CIRP-designated Licensed Insolvency Trustee.

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