Financial literacy is one of the most crucial life skills you can possess. It is the ability to understand financial concepts and make informed and effective decisions with one’s finances. It is mandatory for everyone, regardless of age or income level, to have a basic understanding of financial concepts to make sound financial decisions throughout their lives. So, for example, if you buy a car, it’s best to pick the best type of car loan and shorter terms. How to get a car loan? Find the answer here. And today, we will explain the critical components of financial literacy and why everyone needs to learn these concepts.
Earn
The first concept in financial literacy is earnings and income. It is the money that you bring in from working or from investments. Understanding how much money you are bringing in so that you can make informed decisions about spending and saving is mandatory. There are two types of earnings: active income and passive income. Active income is the money that you earn from working. Passive income is the money you earn from investments, such as dividends or interest on savings accounts.
Spend
The next concept that I’d like to introduce is to spend it right. This is the act of using money that you have earned to purchase goods or services. When you spend money, you are using up your earnings. Spending money is not necessarily a bad thing. Spending is necessary to live a comfortable life. However, spending wisely …