Financial Literacy

The term “financial literacy” refers to a variety of important financial skills and concepts. Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.

When you are financially literate, you have the essential foundations of a smart relationship with money that will start a lifelong journey of learning about the financial aspects of your life. The earlier you start the better off you will be, because education is the key to success when it comes to money. People who are financially literate are generally less vulnerable to financial fraud.

A strong foundation of financial literacy can help support various life goals, such as saving for education or retirement, using debt responsibly, and running a business. Key aspects to financial literacy include knowing how to create a budget, plan for retirement, manage debt, and track personal spending.

Financial literacy can be obtained through reading books, listening to podcasts, subscribing to financial content, reading materials on credible websites (like this platform), or talking to a financial professional.




Given the importance of finance in modern society, lacking financial literacy can be very damaging to an individual’s long-term financial success. Even so, research shows that financial illiteracy is very common.

Being financially illiterate can lead to a number of pitfalls, such as being more likely to accumulate unsustainable debt burdens, either through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to poor credit, bankruptcy, housing foreclosure, and other negative consequences.

There are now more resources than ever for those wishing to educate themselves about the world of finance. Although many skills might fall under the umbrella of financial literacy, popular examples include household budgeting, learning how to manage and pay off debts, and evaluating the tradeoffs between different credit and investment products.

These skills often require at least a working knowledge of key financial concepts, such as compound interest and the time value of money. Other products, such as mortgages, student loans, health insurance, and self-directed investment accounts, have also grown in importance. This has made it even more imperative for individuals to understand how to use them responsibly.

Financial literacy can cover short-term financial strategy as well as long-term financial strategy, and which strategy you take will depend on several factors, such as your age, time horizon, and risk tolerance. Financial literacy encompasses knowing how investment decisions made today will impact your tax liabilities in the future.

This also includes knowing which investment vehicles are best to use when saving, whether for a financial goal like buying a home or for retirement. This is not to add the novelties in finance such as e-wallets, digital money, buy now/pay later, P2P lending, and other new financial products that can be convenient and cost-effective but require potential consumers to be educated to assess them adequately to their advantage.




From day-to-day expenses to long-term budget forecasting, financial literacy is crucial for managing these factors. It is important to plan and save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy, defaults, and foreclosures.

Many Ghanaians are unprepared for retirement. Low financial literacy has left millennials also unprepared for a severe financial crisis, according to multiple research studies. The benefit of financial literacy is to empower individuals to make smarter decisions. More specifically, financial literacy is important for a number of reasons. Holistically, the benefit of financial literacy is to empower individuals to make smarter decisions. More specifically, financial literacy is important for a number of reasons:


• Devastating Mistakes Prevention:

Seemingly innocent financial decisions may have long-term implications that cost individuals money or impact life plans. Financial literacy helps individuals avoid making mistakes with their personal finances.


• Emergency Readiness:

Financial literacy topics such as saving or emergency preparedness get individuals ready for the uncertain. Though losing a job or having a major unexpected expense are always financially impactful, an individual can cushion the blow by implementing their financial literacy in advance by being ready for emergencies.


• Reaching your goals:

By better understanding how to budget and save money, individuals can create plans that set expectations, hold them accountable to their finances, and set a course for achieving seemingly unachievable goals. Though someone may not be able to afford a dream today, they can always make a plan to better increase their odds of making it happen.


• Invokes Confidence:

Imagine making a life-changing decision without all the information you need to make the best decision. By being armed with the appropriate knowledge about finances, individuals can approach major life choices with greater confidence realizing that they are less likely to be surprised or negatively impacted by unforeseen outcomes.




Developing financial literacy to improve your personal finances involves learning and practicing a variety of skills related to budgeting, managing, and paying off debts, and understanding credit and investment products. The good news is that, no matter where you are in life and financially, it’s never too late to start practicing good financial habits.


Here are several practical strategies to consider.


Create a Budget

Track how much money you receive each month against how much you spend on an Excel sheet, on paper, or with a budgeting app. Your budget should include income (paychecks, investments, alimony), fixed expenses (rent/mortgage payments, utilities, loan payments), discretionary spending (nonessentials such as eating out, shopping, and travel), and savings.


Pay Yourself First

To build savings, this reverse budgeting strategy involves choosing a savings goal, such as paying for higher education, deciding how much you want to contribute toward it each month, and setting that amount aside before you divvy up the rest of your expenses.


Pay Bills Promptly

Stay on top of monthly bills, making sure that payments consistently arrive on time. Consider taking advantage of automatic debits from a checking account or bill-pay apps and sign up for payment reminders (by email, phone, or text).


Manage Debt

Use your budget to stay on top of debt by reducing spending and increasing repayment. Develop a debt reduction plan, such as paying down the loan with the highest interest rate first. If your debt is excessive, contact lenders to renegotiate repayment, consolidate loans, or find a debt counseling programme.



Becoming financially literate involves learning and practicing a variety of skills related to budgeting, managing and paying off debts, and understanding credit and investment products.

Basic steps to improve your personal finances include creating a budget, keeping track of expenses, being diligent about timely payments, being prudent about saving money, periodically checking your credit report, and investing for your future.




There are five broad principles of financial literacy. Though other models may list different key components, the overarching goal of financial literacy is to educate individuals on how to earn, spend, save, borrow, and protect their money.




To many, the world of finance is incredibly intimidating; filled with complex terms and concepts not intended to be understood by mere mortals. This, thankfully, is a misconception. Financial literacy is well within the reach of anyone of any level of education.

Financial literacy is having a basic grasp of money matters and its four fundamental pillars: debt, budgeting, saving, and investing. It’s understanding how to build wealth throughout one’s life by leveraging the power of these pillars.

Put very simply, financial literacy is the difference between living from pay check to pay check, and being able to afford the things you want and need, to building wealth that works for you, which is why financial literacy is so important.


1. Debt

Debt is money you spend that isn’t yours. If you borrow money from the bank, use a credit card, or take out a short-term loan, or a payday loan, you are accumulating debt.

While debt is viewed negatively, for most people, it is necessary because only the extraordinarily wealthy can afford to pay for a house, car, or education with cash. The first lesson here, is to understand the difference between good debt and bad debt and to avoid bad debt as far as possible.

Good debt is considered money borrowed for things that are absolutely necessary for making a life e.g. a house and for advancing your money-making potential e.g. an education.

Bad debt is considered borrowing money or using a credit card to pay for things you don’t need, such as expensive clothes, hi-tech electronics, eating out at restaurants, going on holidays, etc.




Financial Freedom

Multiple Income Streams

Debt Management