Five Pillars of Financial Literacy

November is financial literacy month – a great time to reflect on your relationship with money and the decisions you make that guide you toward a secure future.

 

Financial literacy is a set of five key skills that help Canadians navigate the complex world of personal finance with clarity, empowering them to achieve their important financial goals. These key pillars of financial literacy typically include the following:

 

Earning

 

Building and maintaining a steady income stream is necessary to meet daily financial needs, enjoy life and save for the future. Increasing earning potential through skill development, education and professional diversification opens doors to financial stability, long-term growth, and overall well-being.

 

Budgeting

 

Knowing where money is going is the foundation of financial literacy. Budgeting is like creating a detailed map that ultimately leads to a financial freedom destination. This map allows you to understand and control extraneous expenses and direct money towards the higher purpose of building wealth. Budgeting help investors to harness their money and priorities to align with overall vision and goals.

 

Managing Debt

 

Borrowing plays a central role in most people’s lives, so understanding how to make informed decisions about debt is critical to financial well-being. For example, borrowing to purchase a home (an asset which usually appreciates over time) is different from using high-interest credit cards. Understanding types of debt, interest rates, credit ratings and strategic repayment strategies may empower you to save money and achieve your long-term goals.

 

Saving and Investing

 

Consistently setting money aside over time is a crucial pillar of financial literacy and this involves both saving and investing. Saving is allocating a portion of your income for future needs and emergencies. Investing is about putting your money to work by acquiring assets that grow through compounding returns. Understanding how saving and investing work together to increase wealth helps build a strong financial foundation for a more prosperous future.

 

Planning

 

The power of earning, budgeting, managing debt, saving, and investing can all be magnified by wise planning. A carefully considered financial strategy offers a structured approach to managing money and saving for the future. It factors in anticipated milestones like going to school, buying a house, supporting a family, or retiring comfortably. A well-designed strategy can lessen fallout when the unexpected financial stresses occur like job loss, illness, or economic downturns. Notably, 81% of Canadians who have developed a written financial strategy with a professional advisor report significantly higher financial and emotional well-being1.

 

Financial literacy is primarily about developing money management skills to help you make wise, informed decisions. How you employ these skills will vary depending on factors like age, time horizon and risk tolerance. But no matter where you are in your financial journey, your decisions today will set your course for the future.

 

We are here to guide you towards a brighter future. Connect with us today.

 


 

 


 

Copyright © 2023 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.

 

WHAT WE DO

Many people will offer you advice on which…

For most Canadians, retirement is a…

Many people assume that estate planning is…

Investment tax planning is not just about writing the…

Careful portfolio analysis is necessary to…

Proper analysis is vital to ensure that you aren’t…

LIFE STAGES

You are more experienced now, your bank…

If you are just starting out, it’s easy to…

You get home from work, your spouse is…

During the last market downturn, retirees who…

Running a single-person household has a unique set of..