What is... Financial Literacy?
The world of finance can be complicated, fragmented, and often obscured by impenetrable jargon that frequently use five words when one would have done.
The problem was so bad that British government set up a Financial Education Body, now known as the Money Advice Service, in 2010, to make the world of finance more accessible to the everyday person and increase the public’s financial literacy.
What is Financial Literacy?
Financial Literacy is the term we use to refer to “the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it and how that person donates it to help others”. Specifically, as Investopedia suggests, it refers to "includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement and tax planning".
But what kind of knowledge and skills are we talking about? Is it just about knowing how to make the most out of your money, or is it more complicated?
“simple things like tracking your spending or setting up a budget go a long way to help you make effective choices with your finances”
At its heart, Financial Literacy is about how well you manage your personal finances. Often, companies use jargon to make managing your money sound more complicated than it is, when simple things like tracking your spending or setting up a budget go a long way to help you make effective choices with your finances.
So to become more financially literate, and get the most out of your finances, here are 5 simple things you can do to manage your money:
(1) Know where your money is going
Our spending can often get away from us. Factoring in food, rent, bills, insurance, leisure, travel and everything else, it is very easy to lose track of your spend, making it very difficult to know where to start when trying to spend money.
But by tracking your necessary spending and knowing how much money a month you have to go towards everything else makes it far easier to cut back on your food or leisure bills.
(2) Setting yourself a budget
Once you know what you are spending, you can start to figure out how much you can, and want, to save.
”Cutting down on your unnecessary spending is especially important if you are low on emergency savings”
Whether that means cutting down on snacks or walking to work, find your unnecessary spending, find the best way to reduce it, and stick to your budget. Cutting down on your unnecessary spending is especially important if you are low on emergency savings.
(3) Saving doesn’t just mean giving things up
The most obvious way to save money is to simply stop spending it on particular things, but this isn’t the only, or necessarily the best, way.
Many of our expenses can be reduced in other ways, from changing contracts on your mobile or broadband to buying value products in place of the big brands. There is often a lot of money to be saved on your regular bills or food shop.
(4) Getting the best deal from your bank
In September, research by the Social Market Foundation found that the average consumer could save £116 by switching current accounts, but that 9 in 10 of us do not seek out information about accounts other than our own.
Considering the vast range of perks, interest, overdraft, and special offers available on the market, it can save you hundreds to switch to an account more suited to your spending and saving habits.
And it’s not just current accounts where you can save money. Savings accounts, mortgages, loans and other bank services are all highly competitive markets, make sure you shop around to get the best deal.
(5) Take advantage of services that make managing your money easy
If the above all sounds like a lot of paperwork, time and effort, it doesn’t have to be.
Curve allows you to track and categorise all your spending, keep an electronic archive of your receipts, and manage multiple accounts at once from just the Curve card, making budgeting and your expenses easy.
Curve is a single card and app that combines all your existing bank cards into one, allowing you to spend from all your bank cards using just one Curve card, unlocking benefits such as: keeping on top of your business spending on-the-go with real time notifications, managing and tracking your spend in the app, and saving money when you travel with super low foreign exchange fees - all in one place.
Curve is built for freelancers, entrepreneurs, contractors and small business owners, enabling them to make smarter choices with their money. Sign up today at imaginecurve.com.