Financial literacy is the education and understanding of various financial areas including managing personal finance, money and investing. It is one of the most important skills a person can acquire and yet almost no school teaches it. Schools are meant to teach the workforce, not hot to make anyone financial free. This is why almost 80% of Americans live paycheck to paycheck.
80%! Can you imagine that?
Everything costs money. Food, a house, a car. We all need money for our most basic needs, but school doesn’t teach a thing about money, investments or even how to pay taxes!
Now you’re thinking..
“Ok, but what does that have to do with why I shouldn’t keep all my money in the bank? If I save money and keep it there I won’t lose it right?”
Ever heard about inflation? That’s right.
At the start of the year you can buy a pack of gum for $1 and if you keep $1 in the bank at the end of the year you will end up with around $1.0003 in your bank account, but your gum will cost $1.03. Now you just can’t afford that gum.
Your money LOST VALUE by just standing in there. You literally lost money by keeping it in the bank while your bank just made more money with your dollar. How? Because it lent that money to someone on a higher interest rate.
This is why you should NOT keep all your money in the bank. But you should keep enough for your basic needs plus some extra for an emergency, otherwise, you will end up needing to borrow, and that’s bad.
So where do you keep your money? You invest.
There’s a lot you can do with your money to make it grow more than the inflation. And no, gambling is not an option. Stocks, real estate, or cryptocurrencies (although some people see it as gambling) might be viable options. But you should only invest in something you really understand and works for you. Simply throwing money to a stock you don’t know might be a bad decision.
Although there is one investment that is never wrong, you will always get the most of it. And that is..
Investing in yourself
This means learning everything that you can about a certain topic, learn to invest and how to make money. There is a lot of free information online, including this blog.
We’ll talk more about all types of investments in the future, but for now, make sure you follow the blog so you won’t miss a thing.