Why it is necessary to be financially literate

Literate management of your funds is the beginning of the road to financial independence. In fact, the ability to earn is not enough for achieving real welfare, it is much more important to be able to manage money properly. Financial literacy is the ability to keep a record of your earnings and expenses, accumulate savings, orient yourself in the world of finance and be able to choose the right financial services, know when and how to protect your rights as a consumer of financial services. Financially literate person, who can compare his earnings and expenses and who can invest his savings for the further increase of profits, will never face any financial problems.

Here are the simplest rules and anyone, who wants to make profit besides his salary, should follow them:

• Invest the 10% of your monthly income;
• Learn about the financial instruments you are going to invest funds in;
• Study the information about the organization in which or through which you are going to invest funds;
• Compare financial products and services offered by various companies;
• Listen and analyze the economic news;
• anage your risks, do not yield to emotions and temptation.

If you, by having accumulated funds, decide to take up investing actively and generate high profits, note, that you will have to spend much time on studying the market. Active investment involves direct participation of the investor, who deals with all the risks, which are very high, and only in case of having sufficient skills and experience, the risks can be reduced.

In case of passive investment, you can simply give your funds to a professional manager and make a small but less risky profit. But in this case the absence of financial literacy can cause you to come across swindlers and non-professionals.

Even if you decide to take the easy way out and open an account in the bank or keep your money in currency, you will need to be financially literate in order not to lose your savings. Study and evaluate:

• Whether bank interest rates on deposits cover the level of inflation in the country;
• Whether the economy of the country and its national currency in which you are going to keep your savings is stable enough.

For most people the absence of financial literacy leads to the fact that by not having taken into consideration their capabilities, people get caught in a vicious circle called “credit” and they cannot get out of it for many years.

Financial literacy will allow you not to lose your funds and even multiply them.