Making Sense of Financial Literacy

Financial Literacy simply means that you have an understanding of, and the ability to apply, financial knowledge in your every day life to your personal finances. It is a life-long learning process.

Financial literacy is comprised of four basic topics which must be learned in combination in order to maintain balance:

1. Financial Tools
• Opening and using a checking and savings bank account
• Understanding basic taxes
• Understanding the various types of insurance
2. Budgeting
   • Understand the basics including how much money you make versus how much you spend
   • Know the importance of spending less now to save for rainy days and future major purchases
   • Understand retirement planning- what does a person need to do now in order to be able to retire
3. Savings
   • Understanding interest and the compounding effect of savings over time
   • Avoiding scams, frauds, swindles and identity theft
   • Knowing about various investment alternatives, such as stocks and mutual funds
   • Understanding the importance for saving for the future
4. Credit
   • Knowing the difference between a debit and a credit card
   • Keeping track of credit card purchases and paying off the balance
   • Understanding how interest is charged on credit cards and loan balances
   • Understanding fees such as late charges, over-limit fees, renewal fees
   • Understanding car loans
   • Understanding what's involved with buying a home

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