Introduction: What is Financial Literacy?
Financial literacy is the ability to understand and use financial skills to make informed financial decisions and take effective actions regarding personal money management.
Financial wellness is your state of financial well-being or how financially "healthy" you are. Wellness is not just measure by your income, lifestyle, or outward displays of wealth. Financial wellness is instead an evaluation of how much control you have over your regular finances and your ability to withstand a financial emergency that might come up. It is a measurement of your ability to maintain freedom of choice about how you enjoy your money and stay on track to meet your future financial goals.
Increasing financial literacy can adjust people's core attitudes and beliefs about their money and prompt change in financial behaviors that can help them achieve financial freedom and security.
The Ladder to Financial Wellness will be your guide to improving your financial health and strengthening your money habits. If you have ever climbed a ladder, you know a couple of things about this. You know that you can't get to the top instantly. Instead, the easiest and safest way is to climb, rung by rung, starting from the bottom. By climbing higher and higher on the ladder, you tend to grow stronger and more confident over time. The same is true with your money. We have to climb, rung by rung, starting from the bottom so as to build our strength and not risk falling down and further away from financial wellness. Luckily, basic money management has a clear order of which "rungs" to grab hold of first. By focusing on the steps in the lower part of the ladder first, you ensure your finances have a solid foundation.
This module looks at what these steps are in the upcoming chapters. It begins with the first step of starting with the budget, the foundation of all money management. Then you will move on to learn about creating an emergency fund, considering credit and debt, and planning for the future. Lastly, you will consider that highest rung: what it means to grow wealth.
To continue out discussion on what financial literacy is, you can follow the five steps listed below. Let's get started!
Chapter 1. Start with a Budget
Chapter 2. Create an Emergency Fund
Chapter 3. Consider your Credit and Debt
Chapter 4. Plan for the Future
Test your Knowledge: Financial Literacy Overview