Financial literacy is the confident understanding of concepts including saving, investing and debt that leads to an overall sense of financial well-being and self-trust. It starts by building a basic knowledge of money matters at a young age (The so-called Millennials), understanding of debt management, investment options and the risks involved, savings options and other financial issues.
What Does It Mean to Be Financially Literate?
The goal of financial literacy is to establish a feeling of control over your finances while also using money as a tool to freely make choices that build greater life satisfaction.
When you’re financially literate, you understand how to allocate your income toward various goals simultaneously—not just to ongoing expenses, but to savings, debt repayment and an emergency fund too. While the bitter truth is that many youths in Kenya may not have a lot of disposable income to help them reach all their financial goals, financial literacy will help them to know how to prioritize financial goals and make strides when they are able to.
The Situation in Kenya?
Existing statistics show that there is a lack of financial illiteracy among the youth. It, therefore, remains a major hindrance to their economic empowerment, makes it hard for the youth to navigate and use financial services, leads to inappropriate financial decisions, and exposes them to added risk by borrowing from informal sources, saving too little, and failing to access appropriate financial services.
The Ministry of Education through the Kenya Institute of Curriculum Development has infused financial literacy in the curriculum as a cross-cutting and emerging issue which must be taught to learners right from primary school. This, therefore, shows how important it is. Various organizations and institutions in Kenya have also established financial literacy programmes for out-of-school youth to help them improve their financial management skills and link them with opportunities for entrepreneurship.
Importance of Financial Literacy to the Youth
Financially literate youth not only manage money with more confidence but also have a better chance of handling the inevitable ups and downs of their financial lives by understanding how to prevent and manage issues as they arise. That can mean keeping a close eye on their finances. On the other hand, financial literacy can help the youth save diligently for things that matter to them, such as a house, car, marriage or further education.
Ways financial literacy can affect your life:
- Understand how much you earn and spend. When building financial literacy, making a budget is one important way to establish a true understanding of your income and expenses. Once you have a budget, you can continue to track spending and revisit your spending plan regularly.
- Repay and avoid debt. Sometimes it is necessary to get into debt. However, remember to repay your debt promptly so that you avoid the risk of being listed in Credit Reference Bureaus (CRBs). If you already have debt, financial literacy can help you choose the best method to get out of debt.
- Protect yourself from debt. A crucial way to prevent debt from building is to create an emergency savings account. A financially literate saver knows how much to set aside—ideally three to six months’ worth of expenses—and aims to keep it at that level at all times.
- Work toward a secure retirement. The time to think about retirement is NOW! Whatever your other short-term plans, save for retirement at the same time. When you’ve become financially literate, you’ll have a better idea how much to save, what type of retirement you want and how to get there.
The Power of Financial Literacy
As a youth, ultimately, the best outcome of your commitment to financial literacy will be increased confidence in yourself, begin valuing money, spending it, keeping track on spending through updated records, saving for the future and investing in productive and sustainable activities.
When you have the knowledge you need to make informed decisions, you’ll be able to trust that you can avoid going into debt or investing with too much risk. From there, you can create and pursue financial goals that will most support your vision for a happy life.
Article by Evans Peter | Writer and Technology Enthusiast | eoriwo2012@gmail.com
