By Ernest Eguasa
What is financial Literacy?
Financial literacy means, in very simple terms, understanding money and how it works. This includes knowing how money is made, saved, protected, spent as well as the skills & ability to use this knowledge to make good financial decisions.
In the words of a wise man “Money is slow to come but very quick to go”. -MI the Nigerian Rapper.
Why is this important to you?
1.Ages 8-14 is the time of life that life long financial habits are formed. This is the same time much of a person’s personality & life values are formed.
2.Understanding money & how it works will have a large effect on all aspects of your life (family, friends, health, relationships, marriages & children). Most of life events is going to have a need for money.
3.This can be the difference between living from hand to mouth and living well in financial freedom that is free of unnecessary pressure with the ability to meet unplanned life events.
4. It is very important in achieving most of life goals
KEY FINANCIAL TERMS TO KNOW:
1.Assets – Anything you own that generates income/cash to you or reduces your expenses i.e. anything that adds money to your pocket e.g. owning a house on rent.
2.Liability – Anything you agree to or that you do that takes money away from your pocket e.g. buying on credit, borrowed money or loan.
3.Income – What you get for creating value that someone is willing to pay for e.g. salary or profit from business.
4.Expenses – What you pay in exchange for value (item or service) e.g. mobile data or food.
5.Budget – laid out plan of all your income & expenses to meet a financial objective.
6.Interest – This is what you earn or pay in addition to what you lent to someone or what you borrow from someone.
7.Investment – These are ways you can put in your savings to increase the value i.e. interest or that gets you more cash e.g. invest in a house for rent or in a business.
5 key things to know, remember, practice & share
1.Know your sources of income & the reasons for your expenses.
2.Difference between One-time expenses & living expenses.
3.Have a personal budget and/or cashflow planner.
4.Save, Save & Save…Save before spending.
5.Invest your savings…a smart investor always protects & grows his/her investment.
Simple Steps to get started
1.Study your allowance and expenses for a month.
2.Have a savings target for the year.
3.Start saving part of your allowance with small safe aka “Kolo”.
4.Save at least 10 – 20% of the allowance as soon as you get it.
5.If you have a bank account already, consider using online savings & investment platforms like Piggyvest and Cowrywise that will save your money at an interest.