How financial literacy can improve your life

Today (the 8th of September 2020) is International Literacy Day. For over forty years, UNESCO has used this day to remind the world that literacy is a human right, and the foundation of all learning.

On this day we want to extend this conversation to financial literacy.

What is financial literacy?

Financial literacy is the know-how that allows people to make smart decisions with their money. It’s important because we live in a system where money, and the way we manage it, impacts everything in our lives. From our relationships, to our homes, our happiness, our jobs and our mental health. That’s why our wellbeing is so often at its mercy, and why we suffer when we’re not in good shape financially speaking.

Yet unfortunately, financial literacy tends to be an area of learning that people of all ages aren’t getting enough of. And instead of trying to improve our understanding here, many of us think that the only way to solve our money worries is by earning more - ideally much more. But I question how much that will help if we don’t actually know what to do with our money.

Money problems aren’t restricted to people earning under a certain amount

After all, it’s a fact that money problems aren’t restricted to individuals earning under a certain amount. If that’s the case, then earning more money isn’t necessarily the answer to all our money related problems.

So a challenge I put to you is this. Can we do more to build financial health with what we have?

Can we in fact solve a lot of our problems by first understanding our finances, and then by making our money work harder for us? Further, by understanding what’s going on in our financial worlds, are more of us able to make the move from surviving, to thriving?

Financial literacy is our key to financial freedom

If like me you believe the answer is yes, then financial literacy is our key to financial freedom. And this isn’t a purely selfish endeavour, because when we are more financially stable ourselves we are also in a better position to help friends, family and our communities. Whether that’s directly with money itself, or with the increased energy, happiness or time we may find in our possession when that area of our life is no longer causing us sleepless nights.

In his excellent TED talk, How I learned to read -- and trade stocks -- in prison, Curtis "Wall Street" Carroll says, “financial literacy isn’t a skill - it’s a lifestyle.” In his mission to save more people from a life of crime, poverty and reoffending, he now shares a simple, powerful message: We all need to be more savvy with our money.

We all need to be more savvy with our money

Carroll helps people do this through Project FEEL (Financial Empowerment Emotional Literacy). An important aspect of FEEL is evident in the second E in the acronym which signifies the involvement and influence of our emotions on our financial management.

Becoming financially literate requires a combination of technical know-how (covering things like pensions, interest rates, savings, credit cards, mortgages, loans and investments) — and the bravery to investigate how we as individuals are interacting with our money on a psychological and emotional level. When it comes to the latter, the reality is that we all hold deep rooted beliefs about money that were likely formed at a very early age as the result of our parents and our environment. And in some cases, this can cause us issues as adults.

This messy involvement of emotions reminds us that we are human. And although we all like to think that we make decisions based on logic and reason, our emotions usually play a role too. It doesn’t matter what gender you are, when it comes to financial planning emotions often skew our ability to use logic.

Emotions often skew our ability to use logic

Common situations where emotions come into play when dealing with our finances include: Overindulging in retail therapy at the shops (physical or online); overstretching on how much we borrow with a mortgage in ruthless pursuit of the dream home; panicking in the face of investing in the stock markets despite poor interest rates on savings accounts; procrastinating over opening the most recent bill reminder from a utility company, council or bank; feeling awkward about having that conversation about money and who pays or owns what with your boyfriend or girlfriend; being too ashamed or embarrassed about finances to ask for help when you need it; and fear preventing you from sorting out your debts. Maybe you recognise some of these, maybe you don’t. Either way, it’s plain to see how emotions and finances intertwine.

There is no right or wrong way to be with money

Whether we realise it or not many of our attitudes, beliefs and behaviours with regards to finances are learnt from our parents. For some of us that might lead to equating our bank balances with our self worth, or spending everything we have to live care-free in the now with no safety net or plan for the future. Or it could mean the opposite; saving money so obsessively that rarely do you let your hair down and have a little splurge to treat yourself.

There is no right or wrong way to be with money. You must find what works for you. To do this you need to understand your goals, and from there scrutinise your beliefs, attitudes and behaviours to check whether they’re helpful to you in the pursuit of your goals.

Ready to get financially fit? Here’s where you can learn about personal finances and what you can do to build your financial literacy

Finally introduced to the national curriculum in England in 2014, financial literacy is now taught in schools. Although this is not especially helpful for those of us struggling to get our heads around personal finances in our twenties, thirties and forties — it hopefully will be for our children.

If you want to learn about personal finances and what you can do to build your financial literacy, here are a few things you can try:

1. Find out how Loqbox can help

We regularly share tips, advice and articles helping you to master your money and achieve your goals on our blog and social media channels. Stay up to date with the latest episodes of Two Minute Money via our YouTube channel. You could also open a Loqbox to help build your credit score. (More on credit scores later.)

2. Listen to podcasts

Podcasts are great learning tools because they so easily integrate with our lives. It’s simple to pop one on while you’re driving, at the gym, walking the dog or cooking dinner. Try one of these podcasts on personal finances recommended by PensionBee.

3. Explore the world wide web

Built to make information more accessible to everyone, everywhere — there are so many personal finance blogs and websites available that can help make developing financial literacy not only a cinch but fun too. (Including Loqbox of course, but we’re biased.) Feel free to have a Google and explore. But here is a great list to get you started.

4. Build a solid budget

When you’re ready to take responsibility for your money and how it gets spent, developing a solid budget should be your next step. Try not to think of budgeting as limiting your spending, but as being intentional and deliberate with your money so that you get what you want.

5. Start building your savings

A survey in 2019 found that 7.8 million millennials have no savings or investments in place to help them achieve their ambitions. Yet, if only for your financial stability, it’s recommended to have at least three months worth of bills saved up in case anything unexpected happens. That way you’re in a much stronger position to weather the storm.

6. Pay off your debts

This should really be a priority over building up your savings if you do have debts that need to be paid off. If you’re struggling, remember there's a lot of free advice available online. Try StepChange, and talk to your friends and family. Don’t suffer in silence.

7. Check your credit reports

Another thing you can do, especially if you’re planning to apply for credit like a mortgage or car finance in the next six months, is to check your credit reports. Your credit score can indicate how likely it is that your application will be successful. To find out more about how to do this, check out our blog here.

8. Read some personal finance books

There are some great quick reads available for those who are partial to a book or two. Try Open up: Why talking about money will change your life and Money: A user’s guide. Both are straightforward and fun.

Thanks for reading, I hope you found this blog helpful and that maybe even you feel a little bit inspired to start exploring the world of personal finances some more. And Happy International Literacy Day!

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Sign up for our monthly emails and we’ll do our best to help you find your way on your journey with money
Give your credit score a boost
For just £2.50 a week, you could see your credit score rise by up to 300 points in the first three months
Get started
Improvements to your credit score are not guaranteed