Ever wondered how important financial education is? People generally tend to think that financial education is meant for people who are either looking to invest money somewhere or are running some sort of business. Most people are under the effect of this false illusion that unless they have to deal with heavy finances on a day to day basis, they don’t need proper finance education. But that’s not true, because the relevance and significance of finance education extend beyond the investment and business aspects.
The generally prevalent concept of financial education to be entirely oriented around balance sheets and statements of loss and profit is also not correct. Financial knowledge encompasses many other perspectives, as well. Since everyone uses money, it is important for all to be educated in finance. It is particularly essential during the initial stages of one’s practical and professional life because education influences an individual’s mind to manage finances better. The importance of studying finance should be understood so that we can make informed financial decisions.
It’s the Origin and Cause of Financial Literacy
Financial literacy is the kind of knowledge which puts an individual in a position of making informed decisions about the money. It optimizes an individual’s tendency to manage debt better, take care and track of incomes and expenditure. Taking financial education and getting involved in its research makes an individual financially literate.
You Understand Financial Products Better with Financial Literacy
Many people commonly experience problems understanding the products and services of banks. Have you ever read the papers that come with your credit card? Did you read them from start to finish? If you did, were you able to understand them? Probably not – because most people fail to understand the financial terms. Their meanings are incomprehensible for them because they have not sought finance education.
An individual who is financially literature can do a cost-benefit analysis of investments and financial products and services better. He/she knows what interest rate or rate of return means, what’s equity, and what is earnest money. In-Depth knowledge of all these terms and others related to finance education is a pre-requisite for making informed decisions. Without this knowledge, you may try to open up a saving account in your bank but actually may not benefit from it as much as you would have had you opted for another service that you declined because of your misunderstanding or lack of knowledge of it.
The financial market is getting increasingly complex day by day with the incorporation and use of advanced software and financial products. If you want a financial product and you lack specific knowledge of its functionality, you may end up incurring a loss. An example of this is the pension schemes that are sought by retirees without their full knowledge of them. Likewise, many investors tend to take money from the lending financial institutions and don’t know how to manage debt, and hence risk getting bankrupt.
Most consumers of financial products and services have zero guidance on their functionality. Only upon demanding guidance about a product from a professional can a consumer get some information, but it’s too difficult to understand even then. Many people end up being in heavy debts because of making uninformed and irrational decisions. Also, this is one of the reasons behind increasing insolvency of businesses.
It’s All Too Technical to Learn On Your Own
A fundamental reason why financial education should be taken in proper college and university programs is that it’s too technical and difficult to take on your own. It’s not like a topic of social psychology or English literature that you’ll be able to understand on your own. The terms are so complicated, and the field is so technical that it’s almost impossible to understand a concept in depth unless there is the guidance of a learned professional with you.
What Is the Minimum We Can Do
At the very least, if we can’t get enrolled in a full-fledged bachelors program in financial education, we should all opt for some kind of diploma or certificate in financial literacy and money management. It is crucial to have a basic understanding of the business terms at least. Such certificate programs involve a range of useful activities like essay writing and software teaching that are very educative for the learners. After getting the certificate or diploma, we can see if we have options for attaining further education in this dimension.