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Financial literacy refers to the ability of a person to understand money matters in a manner that allows them to make sound financial decisions. This includes knowing how to set up a budget, the impact of loan terms that differ on credit, and how to choose the best investments to save for retirement.

A good understanding of financial concepts can allow people to avoid problems such as excessive debt, expensive investments, and a poor credit score. It also empowers them to build savings and pursue goals like buying a new car or paying for their children’s college education. Financially educated individuals can also save money for unexpected expenses such as COVID-19s, home repairs, and have the ability to access funds during an emergency.

It’s not a secret that Americans have a problem with financial literacy. However there are ways to improve this. There are numerous online resources and apps to teach you about money management. Robo-advisors can give insight into investment strategies. Community organizations provide workshops and educational material. It’s also important to stay up to date with financial news, updates and topics to be aware of any changes to regulations or other relevant topics.

In a recent survey, 38% of respondents said that their financial literacy was lacking. This could have cost them $500 or more. To prevent this from happening, it’s important to develop flexible financial literacy programs that allow millennials to learn at their own pace rather than being forced to complete the entire course.

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