Earning, Saving & Investing, Spending, Borrowing, and Protecting are the core principles of financial literacy. As you make financial decisions every day, you use one or more of these building blocks for managing and growing your money. Financial literacy is achieved through financial education. By understanding these principles, students gain the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.

So, what does salary negotiation have to do with financial literacy? Plenty! It is the skill that helps you reach your earning potential over a lifetime of financial wellness. Developing your skills to negotiate your financial worth in the market will help you continue to drive your earnings over time. This is a direct result of your accurate understanding of the time value of money, saving, investing, opportunity cost, budgeting, and retirement planning concepts. Being able to negotiate the salary you deserve, that is in line with the market-based compensation for similar services, satisfies the core principle 'Earning' in financial literacy. Remember, budgeting is making a spending plan based on your earning and potential future earning. For you to budget comfortably, you need to attain the earning you deserve based on what the market is willing to offer for your education and experience level.

To illustrate the connection between financial literacy and salary negotiation skills, you need to reflect on your first job or base salary. If your base earning is lower than the market-based salary range, you will be progressing financially at a slower rate over time. This occurs because your future merit raises and bonuses are typically determined by your base salary. Below is an example to demonstrate the impact of the time value of money and earning power over time:

1. Jane earns a college degree in computer science and starts her first job earning $40,000 a year

2. John earns a college degree in computer science and starts his first job earning $56,000 a year

Given the same 3% merit raise each year, by the end of 40 years, John would have earned $1,206,420 more than Jane for doing the same job at similar locations.

Shocked? You may want to review our modules about Time Value of Money and Budgeting in this series to understand how money grows over time.

For the successful salary negotiation, you can follow the five chapters below.

Chapter 1. How to prepare to negotiate effectively?

Chapter 2. How does salary negotiation close the pay gap?

Chapter 3. How to research market-based salaries to prepare for negotiation?

Chapter 4. Salary negotiation techniques and strategies

Chapter 5. How to apply this knowledge in practice?

Test your knowledge!

This was made possible in partnership with The Singleton Foundation for Financial Literacy and Entrepreneurship. This video and more videos like this can be found on Millionstories.com.