I can’t think of a more important topic today than how to build financial literacy. Whether you are 12 or 82, have $10 or $10 million, finances affect all of us and the more we know, the better we can manage these resources and the better our life will ultimately be. Let’s take a deep dive into some ways that you can build your financial literacy muscles. But first, we should understand what financial literacy is and why it’s so important.
What is financial literacy?
According to Investopedia, “Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.”
Why is financial literacy important?
Money is key in today’s society. I wish it wasn’t as important as it is, but that’s what we have to work with. Here are a few reasons why you would want to improve your financial literacy:
- Wealth generally doesn’t happen by accident, it is something that people have to work towards and gaining financial literacy is one of the first steps.
- Financial opportunities are varied and sometimes complicated. In past generations, people used a cash system and didn’t have debt available the way we do today. Now there are so many options that it is important to find what is really best for you.
- People who are more financially literate are less vulnerable to financial fraud
- You need financial literacy to support other key life goals like post-secondary education, marriage, home ownership, retirement, or starting a business.
Basically, the opposite of financial literacy is financial illiteracy and the result can be devastating. For example, people that are not financially literate are more likely to either spend poorly or lack proper preparation and then accumulate huge amounts of debt. This debt can lead to bankruptcy, poor credit, losing your home and other serious outcomes.
Are kids being taught financial literacy in school?
No. Unfortunately, the school system here in Canada teaches very little about how finances work. I understand that it’s much the same in the US. Real story: when my child was in grade 3, he was given an assignment where he had to spend $10,000 on a credit card and show his tally. This was a math assignment but it illustrates just how bad some of the messaging is around money in schools. I adjusted this for my child to be that he had saved $10,000 and now needed to spend it from his bank account. And I called the teacher to explain why and how damaging it was to 9 year olds to normalize spending $10,000 on credit cards.
This means that it is up to you and I to take hold of our finances and learn about money on our own time and power. Let’s look at where we can find this information.
Resources to build your financial literacy (and some of my favorites)
- Books
- Your Money or Your Life, Vicki Robin
- Quit Like a Millionaire, Shen/Leung
- Die with Zero, Bill Perkins
- Beat the Bank: The Canadian Guide to Simply Successful Investing, Larry Bates
- The Simple Path to Wealth, JL Collins
- Rich Dad Poor Dad, Kiyosaki/Lechter
- I Will Teach You to be Rich, Ramit Sethi
- The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, Morgan Housel
- Blogs
- Podcasts
- Choose FI
- The Maple Money Show
- Bigger Pockets Money
- Afford Anything
- Canadian Couch Potato
- Free Courses (beginner level)
- Choose FI – FInancial Independence 101
- Eat Sleep Breathe FI – FI School
- McGill University – Personal Finance Essentials
We know what financial literacy is, why it’s important, and where to start learning more. I hope that you can take even one step towards improving your financial literacy whether you’re a passionate newcomer or improving your knowledge along the path.