(NC) November is Financial Literacy Month, a time to focus on our overall knowledge and understanding of finances. Much like reading and writing skills, being financially literate is essential for success in life. Here are four key areas to focus on to brush up on your financial literacy skills.
Budgeting know-how
One of the first things you’ll learn in any financial literacy course is how to prepare a budget. Creating this essential document is the best way to understand your finances. Simply put, you enter all your sources of income in one column, and all your expenses in another. If your expenses exceed your income, you can easily spot areas where you can cut back on spending. There are many free budget planning tools available online.
Banking basics
You should know the difference between savings accounts and chequing accounts, and how to find the best ones for you. A chequing account is typically used for everyday expenses and paying bills. Savings accounts generally offer higher interest rates on the money you deposit but can be restrictive on how you remove those funds. There are also free online tools that compare the fees and interest rates of the various accounts offered by Canadian financial institutions.
Understanding debt
With today’s high interest rates, the term “debt” often has a negative connotation. And if your debt keeps growing month after month, that’s definitely a problem. But there can also be good debt. For example, you might need to take out student loans to pay for post-secondary education. But that education can open doors to higher-paying jobs that would not be available without it.
You may need to take on debt to buy a car or equipment for work, such as a computer or tools. But if you manage your finances properly, you can use your earnings to pay off that debt.
A mortgage is also a form of debt. After you’ve paid off the mortgage, you’ll have a home to live in or an asset you can sell to fund your retirement.
Financial planning
Financial planning is a broad term that covers a number of different ways you can and should prepare for your future. These include planning for your children’s post-secondary education, evaluating your insurance needs, tax planning to make sure you maximize your return while minimizing your tax bill and retirement planning.
If you’re not confident in your financial literacy skills, there are many free resources and courses you can take, including those offered by ABC Life Literacy Canada’s Money Matters program.
Learn more about financial literacy at abcmoneymatters.ca.
