Importance of Financial Education and Investment Awareness

Importance of Financial Education and Investment Awareness

Whether you are a young professional or planning for retirement, it is important for everyone to have financial knowledge. Following are the reasons for the need for financial education and investment awareness:

• Better Decision-Making
  An individual with financial skills makes sound choices in fund management. They are aware of different aspects of personal finance management like budgeting, savings, investing, and debt management. This allows them to track their money effectively and use it wisely. For example, understanding when to buy a term insurance plan for protection or when to invest in mutual funds for growth is part of smart decision-making.

• Wealth Creation and Financial Protection
  Financial education and awareness about investments enable individuals to understand different wealth creation options. A financially knowledgeable person can choose the right product that aligns with their financial goals.

  For example, life insurance with guaranteed income benefits is ideal for those planning to buy a dream home, and pension plans are for individuals planning for retirement. Similarly, term insurance plans are important for financial protection, ensuring your family’s financial security in case of your untimely demise. This balance of wealth creation and protection is the essence of smart planning.

• Debt Management
  A financially literate individual also has strong debt management skills. They use credit responsibly and manage repayments effectively. What’s more? Financial knowledge helps individuals avoid predatory lending of their hard-earned income. Many financially aware people also protect themselves by securing a life insurance policy, so that in case of their absence, the family is not left burdened with debts like home loans or education loans

• Avoid Frauds and Risks
  Fraudulent schemes and risk-associated investments may not align with your financial goals. Hence, a financially knowledgeable person has the ability to assess risks associated with the products. This allows them to make informed decisions during economic uncertainties.

• Reduce Financial Stress
  The rising inflation is becoming a pain point for every individual. But only a financially literate person can combat it by managing their finances thoughtfully. They know their goals and allocate the funds in different products wisely.

What is the basic rule in financial literacy?

The most common rule of personal budgeting in financial literacy is the 50/30/20 rule. This strategy divides your after-tax income into three categories, i.e., needs (50%), wants (30%) and savings (20%).

With this rule, an individual can build a financial discipline over time. You can also increase the savings per cent by reducing the unwanted needs and wants. Suppose you generally watch movies on an OTT platform at weekends and pay for the entire month. So, you can reconsider spending your money on the OTT platform and invest that in different assets.

Tips to Develop Financial Literacy for Beginners

Here are some tips to gain financial knowledge and make confident financial decisions:

• Educational Resources
  Get access to educational resources like expert webinars and podcasts available online. You can also buy numerous books by best-selling financial authors to develop financial skills.

• Prepare a Budget
  Learn budgeting skills. It will help you track your income and expenses to avoid unnecessary spending.

• Improve Your Basics
  Every financial product comes with unique features. So, make sure that you study about these products to make informed decisions.

• Consult Financial Advisors
  Financial advisors are the best resources to get financial education and investment awareness. They can introduce you to each aspect of financial planning efficiently.

• Manage Debt Responsibly
  The last and the most important tip to develop financial literacy is learning to manage debts. Make sure you always pay your bills on time to avoid extra interest or penalties.

Conclusion

Financial education and investment awareness are mandatory skills for people of all age groups. It allows them to financially prepare for emergencies and create wealth to fulfil their dreams. You can develop financial knowledge either online or offline through financial advisors. One can also connect with expert advisors at PolicyBazaar to learn about the best investment plans and wealth-creation options.

Note: If you are planning to invest in a life insurance plan, know how much premium you would need to pay using a life insurance premium calculator.

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