Financial literacy is the ability to understand how to make financial decision making. When you have financial knowledge, you can manage your income and expenses well, know how to save money, manage debt, arrange financial plans, understand the financial markets and investment opportunities.

Teaching students about financial literacy is important because it gives them the confidence to manage their money as well as to manage their income for achieving future goals. The following are the benefits that students will gain from learning financial literacy:

Knowing about Budgeting

To pay for expenses and debts, students need to understand the effective distribution of income. Budgeting is the first step towards a true understanding of money management. Financial literate students have a habit of monitoring their expenses on a regular basis and reviewing their spending plans.

Understanding and knowing about debt management

If students are taught to understand debt, they will choose low-interest debt, understand about credit cards, and know the different types of credit. Students will understand how to deal with debt and reduce debt penalties, which is useful when they need it as a source of funds in the future.

Understanding about emergency reserves

One way to reduce debt when there is an urgent need is to save money when needed. Students with financial literacy understand how to save money. They have an emergency fund reserve of 3 to 6 months of monthly expenses to deal with unforeseen expenses and will replenish it later without having to borrow money or rely on guardians.

Learning on how to plan for retirement

Financial literacy helps students to have a good idea about the future. They do not only know about how to save money to deal with emergencies, they will also understand and calculate how much money they need to save and what to do to continue to survive when they retire.

Financial literacy is not just for the sake of wealth. It is a necessity in daily life. It will help all of us to have confidence in managing our personal finance. When each of us has strong financial knowledge, we will have self-motivation, and it gives us the drive to think about other things well, such as studying, love, family time, friends and other things in life that money cannot buy.