Why is it Important to be Financially Literate?

Financial literacy is important in the path to financial success. A lot of people who are smart, intelligent and hard-working tend to lose their money because they invest on something that they believe could help them succeed financially but end up losing it. Simply said, they lack the understanding of money, assets, and liabilities. We need to know the difference of assets and liabilities because this is one of the most common mistakes people make. They would spend on what they believe are assets when in fact they are really liabilities. Compound Savings Interest blog has seen two losses when people make this mistake.

1. They incur a loss because when they sell the product, they would not recover the same amount for that product so there would be loss of money. Also, the product would depreciate over time so the product gets cheaper the longer you hold on to it.

2. They lose the opportunity to invest the money. If you lose $1,000 because of a bad transaction, then you lose the opportunity to grow this $1,000 to $2,594 in ten years if it was invested with 10% annual interest!

This is why it is so important that you realize that every time you spend, you must take note of the opportunity cost of that transaction. Ask "If I spend this amount of money on a certain product, will it get me closer to financial success?". This is only true if what you spend on is not at all necessary or something you could live without. Please don't cut meals in order to save.

A lot of people are just tired of learning and that is a particular reason why they don't want be financially literate. They believe that only people who are graduates of business and finance courses could be financially literate. Because of this, Most people ask friends and family on financial advice and end up on a bad deal.

However, EVERYONE CAN BE FINANCIALLY LITERATE! Yes, you are included! It is actually about common sense. It is knowing what money is for and how to spend your money. It is prudent to ask know what are assets and what are liabilities, how to handle money against inflation, what are dangerous investments and how to avoid them, and what is the path to financial success. Everyone should know that this does not require a college degree and anyone who is eager to learn will be rewarded. Books, seminars and even websites such as this can help you be financially literate. I hope this site, Compound Savings Interest, can help you in your path to financial literacy and in achieving financial success.

More to come here at Compound Savings Interest! have an abundant financial life!