What is the importance of financial literacy for investors? Why should an investor invest in financial literacy education? What benefits do you stand to gain as a financially literate person? Well, I advice you read on.
what is financial literacy?
Financial literacy can be defined as the ability to understand how money works and how the economy and certain decisions affect your personal finance. From an investor’s perspective, financial literacy is the act of understanding how to make money, manage your money, invest your money; and how simple decisions will affect your financial position.
On the other hand, financial literacy education is the process of training yourself to understand the mutual relationship between your personal needs, money and the economy at large; with the sole aim of harnessing these three factors to your personal advantage. So without your time, below are some reasons why financial literacy is important for aspiring investors.
The Importance of Financial Literacy Education for Investors
1. Financial literacy is the foundation of investing and you can never be a successful investor without financial literacy.
2. Financial literacy helps you manage your money better. Effective money management will never be possible without financial literacy.
3. Being financially literate enables you gain greater control of your financial life. Remember, control is essential to becoming a savvy investor.
4. Financially literate individuals have a higher financial IQ than academic literates.
5. Being financially literate will enable you read and understand financial statements; which in turn will enable you look beyond the physical structures of a business.
6. Being financially literate will help you distinguish between good and bad investment advice; or good and bad planners or advisers.
7. A financially literate person is less susceptible to fraud.
8. Financial literacy helps an investor make good decisions on how to invest his money.
9. Being financially literate will make you less susceptible to economic downturns and the corresponding effect of harsh government’s fiscal policy.
10. Having sound financial literacy education will enable you use debt as leverage to build your personal investment portfolio. It will also help you understand the difference between good debts and bad debts.
11. Financial literacy will better equip you with the knowledge of how to protect your money from loved ones, family members and friends, bad brokers and the government.
12. Being financially literate will help you cheat on your taxes legally by using every available tax loophole.
13. Financial literacy will help you know the difference between income, revenue, and net profit; assets and liabilities, income and cash flow, earned income and passive income, investing and trading, capital gains and cash flow, etc.