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Financial education: know its importance and main principles

Financial education is so important that it should be a subject matter in schools. It would be ideal if everyone learned, from a very early age, notions of financial education, so as to know how to take good care of money to avoid problems in the future. But it’s never too late to learn, and financial education can help you save money and, more importantly, prepare for surprises, without having to rely on overdrafts. So let’s talk about this important subject here for you. Check it now!

What is financial education?

Financial education is a series of fundamentals that combine knowledge about economics with some decisions and practices so as to use money in the best way possible.

As hard as it is to resist the temptations to spend money, this is a vital resource for all people, especially when we are responsible for other people as well, as children and parents who are old enough and we have to take care of them and ourselves . And financial education becomes even more significant in this regard.

The importance of financial education

The importance of financial education

We live in a consumer society, which encourages us to shop and spend money all the time. If we are going through a financial education it is easier to understand our consumption needs and manage the expenses incurred.

The goal is not to cut all expenses , but to ensure that they are done responsibly, with planning and making good financial decisions. And to do this, you need to have knowledge, habits that will ensure that you will be able to fulfill your goals throughout your life.

Without financial education you become more susceptible to financial mismanagement, to excessive spending, which leads to the situation of getting the bill in the red and the money to do what you really need.

This may prevent you from growing financially or forcing you to depend on someone when you are no longer able to work or have an income to make your financial commitments.

And then financial education appears again as a way to help you live the present and plan your future to achieve a peaceful life.

But for this, we must follow some principles and we will explain them next.

The basic principles of financial education

There are several principles that everyone who pursues financial education must master. Here are the most important.

Financial independence

Everyone is looking for the much-talked about financial independence, but despite being such a famous concept, usually little is known about it.

There are those who believe that financial independence is no longer needing to work, no more debt or no longer living from salary to salary.

In fact, all of these options are right and financial independence is made up of cycles, which are gradually being conquered over a lifetime.

For example, the last cycle of financial independence is to stop working altogether. At this stage you receive your investment income or retirement income.

However, reaching this step is very difficult and depends on all of the above. Unfortunately, many people fail to get there because they lacked the financial organization from the first cycles.

This should start from the first cycle, which is the stage of independence of the wage cycle. In it you can survive for some time, even if you are without a source of income.

Also known as the emergency fund , this step is extremely important and helps avoid debt if there is a problem or a cut in income. This should be the first goal of any person, and achieving it is already a great victory.

Another important aspect of financial independence is the freedom from debt . Controlling these debts is probably the most difficult and important step in the entire financial education cycle.

They are liabilities that use a lot of resources and are the biggest impediment to growth. Eliminating debts is the highest priority and something that should be done immediately.

To close the cycles of financial independence, there is freedom from your employment . That is, at this stage you have already accumulated income or have enough investments so that you can trade your career for an option that is less profitable but more enjoyable. It is a step before the last, but equally important.

It is worth mentioning that financial independence occurs in stages. It is unrealistic to think that a person who is still young will reach the last stage, unless he has lots of help, luck, or a brilliant way to make lots of money.

That is why it is very important to work hard in the early stages. In this case, time is your greatest ally. Getting rich quick is very difficult, and should not be a goal.

The cycle of accumulation of wealth

The cycle of accumulation of wealth

While financial independence is a long- and medium-term goal, achieving it is necessary to implement short-term attitudes. One is to make the accumulation of wealth at every opportunity.

For example, what happens when you earn your salary? Do you pay all your bills and debts, do some shopping and what is left over? If there is nothing left, or worse, if you stayed in the red , the goal of independence goes further and further.

So every moment, every month or every day, you have to look for an opportunity to save money. A promotion product of $ 1,000 for $ 500 is a great price.

But what is your real value? What is more valuable, the $ 500 saved, or the $ 1,000 that you could have saved, invested or used to help cover some debt? Which of these options helps you to move forward in the stages of financial independence?

It is impossible not to buy anything. After all, there are ways of adding value that are not monetary. A product can be expensive, but it will bring a treat that will make the price worth it.

So you do not have to cut everything. But those who have a good financial education know how to cut what is not necessary and can control themselves.

Goals and financial planning

In order to accumulate wealth, it is necessary to organize. For this, nothing better than setting goals and building a financial plan to achieve a goal.

For example, buying a car may be a necessary goal and the plan is set up from how much you need to save per month to buy that vehicle, how long will I buy it and how it will get paid.

Knowing this value, it becomes clearer how the rest of the money can be used. The same applies to the purchase of real estate, the construction of the emergency fund and any other.

If you already know your goal in the future, you can start planning and preparing for it right now and for that you need to know your finances very well.

Control everything you spend (an expense control or app worksheet for this purpose can be very helpful), and try to organize yourself to achieve the goal. Thus, you will be able to accumulate wealth and finally achieve financial independence.

She saw how financial education is critical for you to accomplish your goals and how never too late to learn: ?

So, start eliminating your debts and implementing financial education already. Good Credit can help you with the tips in our Blog and with credit options, with a portion that fits in your pocket, for you to do what you want. Check here.

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