Financial literacy is a skill that must be learnt, and ideally the earlier the better. The financial decisions we make today will shape our present and future.
Building a solid foundation
It’s not different to laying the foundations for a house. It must be strong and solid to scaffold everything around it.
Unfortunately, there isn’t enough education today on what real world financial literacy looks like, how to live within in their means, set realistic financial goals and make informed decisions regarding their money.
Many young people start out in the workforce already feeling defeated before they begin, believing the great the Australian dream of owning their own home is out of reach.
No one has laid the foundations for them. No one has taught them how to approach saving.
There is no teaching on financial modelling or forecasting or deep understanding of what things cost.
Empowering financial independence
Financial literacy allows young people to obtain financial independence.
Young people go in the world thinking what they earn is what they can spend. They have little understanding of how credit and lending work and how banks perceive lending.
However, by understanding the intricacies of personal finance they can gain the confidence to manage their own money effectively.
They can take control of their financial situation, avoid bad debt, understand the difference between good and bad debt and be comfortable with good debt and make wise decisions about saving and investing. This empowerment fosters a sense of freedom and self-reliance that can lead to a more fulfilling and prosperous future.
Navigating Student Loans (HECS) and Debt
With the rising cost of education, student loans are an inevitable by-product of pursuing academic dreams. However, without financial literacy, young individuals may find themselves burdened by debt and struggling to make repayments. By having a solid understanding of student loans, interest rates, and debt management, young people can make informed choices about their education and mitigate the potential pitfalls of excessive debt.
Capitalising on Long-Term Financial Growth
The earlier young people start investing, the more time they have to capitalise on the power of compounding interest. Financial literacy enables young individuals to understand the various investment options available to them, such as stocks, bonds, business and real estate. With this knowledge, they can make informed investment decisions, diversify their portfolios, and reap the rewards of long-term financial growth. By investing early, young people can potentially secure their financial future and achieve their long-term goals.
Nurturing Entrepreneurial Spirit
Financial literacy fosters an entrepreneurial spirit by encouraging young people to think critically about money and wealth creation. Understanding concepts like cash flow, profit margins, and risk management empowers young individuals to embark on entrepreneurial ventures confidently. They learn to evaluate business opportunities, manage finances effectively, and make calculated decisions to maximize their chances of success. Financial literacy thus fuels innovation, creativity, and the spirit of entrepreneurship among the young generation.
Financial literacy is an indispensable skill that young people should acquire to navigate the complex world of personal finance. By fostering healthy financial habits, empowering independence, and providing the tools to make informed decisions, financial literacy sets the stage for a prosperous future.
Young individuals who possess financial literacy are better equipped to handle financial challenges, seize opportunities, and build a solid foundation for long-term financial well-being.
As a society, we must prioritize the promotion of financial literacy among the young, ensuring they are prepared to face the financial realities of the world with confidence and resilience.
By Colin Lee
Colin Lee is the founder and CEO of Inspire Realty. He is a buyer’s agent and qualified property investment advisor.
He is the owner of seven investment properties and is passionate about walking the talk in order to share first-hand experience with his clients.
His goal is to inspire clients to create wealth through smart and strategic investments and he is passionate about educating young people on finance.
