What is financial literacy? The most common definition of financial literacy is the ability to make appropriate decisions in managing their personal finances. But when you look at this definition closely, you see that it speaks more to the results or outcomes of financial choices. It does not tell us which knowledge areas or competencies make a person able to make those good choices. Other definitions seem to equate financial literacy with investor literacy. It’s about how well you understand the stock market, bonds and other investments. This quiz allows you to test your knowledge of various investments and other financial concepts. Yet this type of definition is far from adequate. You could do well investing, and still not make smart money choices in other areas, such as choosing a mortgage or saving for the future. So let’s try again for a more meaningful definition: Financial literacy is the set of skills and knowledge that allow you to understand: The financial principles you need to know to make informed financial decisions, and The financial products that impact your financial well-being. This definition allows us to identify key personal finance topics and behaviours that support financial success. Without this knowledge, a person is unlikely to pass any test of financial competency. Our checklist would include the ability to: Understand the key financial products you may need throughout your life – including bank accounts, mortgages, retirement savings plans and basic investments like stocks, bonds and mutual funds Understand basic financial concepts like compound interest, investment return, risk, diversification and so on Discuss money and financial issues – even if you don’t really like to talk about them Make good financial choices about saving, spending and managing debt throughout your life: for example, when getting an education, starting a job, buying a house, starting a family, getting ready to retire and living out your senior years Respond competently to changes that affect your everyday financial well-being – including events in the general economy like the recent collapse of financial markets, rising unemployment and the threat rapid inflation. Participate in the Quiz to test your Knowledge about Financial Literacy by clicking below:
Posted on: Fri, 03 Oct 2014 07:06:12 +0000
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