What you need to know to live financially smart life?

  

What fears you to invest in multiple financial products?

You learned how important it is to be financially literate, how it impacts your daily financial decisions, how can you be financially independent but it all precedes financial knowledge.

You get confused when it comes to the point that how can you smartly solve your financial issues and how you should apply principles in your lives to be financially smart.

How the acquisition of financial knowledge really helps you to be financially independent?

What should you consider in the process of learning financial knowledge?

Most of you might have a good understanding of finance, But

Have you secured your future financially? Are you not struggling financially? Don’t you fear investing in different financial products?

Financial education is considered as an important intervention to improve financial well-being.  Proper knowledge of how financial markets operate enables you to make more effective borrowing decisions.

Income has the most significant impact on financial behavior followed by financial satisfaction, financial confidence, and financial knowledge. Knowledge is an important component in financial decision making but other factors play an important role as well.

It’s not about to earn money, It’s about how you manage your money which examines your future financial freedom. Most of you hesitate to channelize your savings only because of a lack of knowledge of multiple financial products. As it requires a good amount of knowledge to choose the right product according to your goals with a suitable time period, now most of you fear the security of money that if you will get assured amount of return on it. Some products have a fixed amount of return while some have not and they have a high risk with high returns. So financial knowledge will make you conscious about your financial position to take calculated risks and estimated amount of return with a consecutive time period.

The knowledge of the basic principles of personal finance is not sufficiently widespread among students. Your parent's income level, financial discipline, and parents’ occupation seem to influence the financial knowledge of children.

How can you educate yourself to live smart financial lives?

When you start thinking from your evolving age you will realize that you develop an understanding to manage your personal finance and you can oversee your daily cash flow, this makes you informed decisions regarding savings and borrowings.

Financial knowledge enables you to take calculated risks according to your creditworthiness so that your goal can be accomplished as well as you can balance your income and investment. It will enhance your financial intelligence quotient so that you will be able to differentiate among the various saving, investment and borrowing options you need not depend on others to make you understand about the calculations of your finance, and this will increase more safety and security, also you cannot blame others for any mishappening.

The categorization according to age- groups will help you to understand at what age you should start to educate and aware of yourself.

For 3-5 year kids

• You need money to buy things
• You earn money by working
• You may have to wait before you can buy something you want
• There is a difference between things you want and things you need.

For 6-10 year kids

• You need to make choices about how to spend your money
• It’s good to shop around and compare prices before you buy.
• It can be costly and dangerous to share information online.
• You should save at least a dime for every dollar you receive.

For 11-13 years kids

• Entering a credit card number online is risky because someone could steal your information.
• The earlier you start to save, the faster you will benefit from compound interest, which means your money earns interest on your interest.
•  A credit card is a type of loan, if you don’t pay your bill in full every month, you will be charged interest and owe more than you originally spent.

For 14-18 year kids

• It is important to know the college in which you want to enroll will cost you before choosing it.
• You should avoid using credit cards to buy things you can’t afford to pay with cash.
• Your first paycheck may seem smaller than expected since money has been deducted for taxes.
• A great place to save and invest money you earn is in Roth ira.

For 18+ year kids

• You should be aware of using a credit card only if you can pay off the money owed in full each month.
• You need health insurance.
• Putting all your eggs in one basket can be a risky way to invest: consider a diverse mix of stocks, bonds, and cash.
• You should always consider two factors before investing; the risks and the annual expenses.

 To enhance your financial knowledge you should focus on these financial principles which give you the basic understanding to manage your personal finance.

• Simple and Compound Interest
• Time value of money
• Impact of inflation on investment returns
• Influence of inflation on price levels
• Risk and return
• Role of diversification in risk reduction.

These principles are widely used all over the world to understand the basic numeracy among students and adults.

Financial knowledge is more widespread among the more educated and the relatively wealthy

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