If you’re literate, you can read. You can read books, news reports and subtitles when you’re watching a streaming series and can’t hear half the dialogue.
If you’re financially literate, you can read — and more importantly, understand — financial documents and conversations. Financial literacy is an understanding of financial skills, such as saving, budgeting and investing.
Unfortunately, while the vast majority of adults are literate, the same isn’t true for financial literacy. But don’t worry, there are programs that can help.
What Are Financial Literacy Programs?
Financial literacy is nearly as important as basic literacy. It’s very difficult to have a good relationship with money without understanding the basic tenets of our financial system. And the earlier one becomes financially literate, the likelier they are to have a successful financial future.
Financial literacy programs teach people the basics of managing personal finance. These foundational financial skills are key to personal and professional growth.
What Can You Learn From a Financial Literacy Program?
Programs can differ from one another, focusing on various aspects of finance. However, some basic financial concepts include:
Saving
Everybody knows that saving money is the opposite of spending money. If you don’t spend it, you’ll have the money for later — possibly for something more important. But where do you save your money? If your answer is, “In a shoebox under my bed,” then one of these programs might be for you.
In seriousness, when people save inefficiently, it’s probably because they just leave money in their checking accounts. A savings account, as its name suggests, is a much better option. But why?
Interest Rates
Interest is an extremely important concept in modern finance. Knowing how interest works and how to benefit from it can help you save for a home, retirement or just a rainy day. Many savings accounts offer high interest rates, meaning your money grows just by being in the account. The more money you have, the faster it can grow. However, you can’t access this money as easily — there may be a penalty for making withdrawals.
Loans
Interest doesn’t just grow your money, it can also grow your debt. Loans with high interest rates are not great. That means the amount you owe can keep going up even if you’re making payments. It’s very difficult to pay off a debt by making only the minimum monthly payments.
Some loans, such as a mortgage, are a part of life for many Americans. However, carrying high levels of credit card debt is something you want to avoid if possible.
Investment
Investing can be an even better way to grow your money than a high-interest savings account. However, there’s risk involved with investing, so it’s important to know what kinds of investments carry the least risk.
How To Learn More
There are lots of online resources that can teach you about financial literacy. You can also look into community college courses or maybe your state’s Department of Education. And of course, you can always contact a Vectra Bank professional — we’d be happy to go over your options with you.
