A Guide on How to Become Financially Literate
Learning how to become financially literate could help you better manage your finances and reach your money-related goals.
Chris Scott
Contributing Writer at Tally
October 17, 2022
A lot goes into managing your personal finances, including budgeting, putting money into an emergency fund, paying down your high-interest debt and investing. During your financial journey, you may come across unfamiliar terms and concepts.
For these reasons, you may want to improve your financial literacy. Financial literacy is understanding terms and concepts that could help improve your money management.
In this article, we’ll outline how to become financially literate. We’ll start by identifying what financial literacy is and why it’s important. Then, we’ll offer seven tools you can use to become financially literate.
Financial literacy: The basics
According to the credit bureau Experian, financial literacy is “the confident understanding of concepts including saving, investing and debt that leads to an overall sense of financial well-being and self-trust.”
If you don’t feel financially literate, you’re not alone. According to an Ipsos survey, “The average American rates their level of financial literacy as a 6.2 out of 10.”
Perhaps one reason for this is the many concepts that can go into building robust financial knowledge, including:
Checking accounts vs. savings accounts
Compound interest rates and the impact they play on credit card debt
The various types of loans that lenders offer, including personal loans, student loans and auto loans
Credit scores and credit reports
Retirement saving accounts, such as IRAs and 401(k)s
Risk tolerances
Let’s take a closer look at why financial literacy is important.
Why financial literacy is important
Regarding money management, literacy is important because it can help you make better financial decisions. University of Pennsylvania Professor Brandon Copeland told CNBC, “Financial literacy can help Americans feel confident about the decisions they make on a daily basis.”
Financial literacy could help you in many different areas, including:
Achieving day-to-day financial stability
Existing debt repayment
Retirement planning and improving the outlook of your financial future
Managing real estate
Understanding your credit history and how it impacts your personal finances
Reaching your financial goals
No matter the reason for improving your financial education, you’ll find that there are many avenues available to help do so. Let’s explore how to become financially literate.
How to become financially literate
When it comes to learning how to become financially literate, you’ll find many resources available. Below are seven things you can use to help improve your financial literacy.
Reading
There are numerous books available that you can read to learn more about financial topics. Some books for financial literacy include:
“Your Money or Your Life” by Vicki Robin and Joe Dominguez can help change your relationship with money
“Get Good with Money” by Tiffany Aliche can aid if you’re trying to find financial security
“The Bogleheads’ Guide to Investing” provides investing basics
“You Need a Budget” by Jesse Mecham can help you budget your money
This is just a small sample of books that could help improve your financial skills. Also, check out your local library in April, which is Financial Literacy Month. Your local library may have additional book recommendations and resources during this time.
Taking a course or masterclass
Taking a course or masterclass can help improve your financial literacy. You may find continuing education classes at your local high school or community college. Typically, there are an array of courses offered, ranging from budgeting basics to identity theft prevention.
There are also online masterclasses. You may want to start by looking at websites like Udemy and Coursera. Udemy, for instance, offers a Basic Personal Finance Masterclass, and Coursera offers a class titled, The Fundamentals of Personal Finance Specialization.
Listening to a podcast
A quick search through Spotify or Apple Podcasts may yield dozens of options related to personal finances.
Popular podcasts include:
Podcasts may be appealing because you can listen to them while commuting, working out, or doing chores around the house.
Subscribing to a newsletter and browsing online publications
Newsletters are a convenient option to help improve financial literacy. They often cover a wide range of information — from personal financial management to investment advice. Newsletters are typically easy to read and concisely provide information.
Like newsletters, another way to improve financial literacy is by browsing online publications. MarketWatch, for instance, produces articles about investing, retirement, the economy, and other similar topics. They also have an advice column, The Moneyist, which answers reader questions.
You can also check out Tally’s† blog for the latest financial information. The blog covers a wide array of topics, and there’s a good possibility that you’ll learn something new when browsing the articles.
Lastly, your bank or credit card company likely has resources online about different topics related to its services.
Following financial accounts on social media
Social media is another great option to improve your financial literacy because of how accessible it is. Instagram Reels and TikTok could be particularly useful, as they allow you to gain information via short tidbits quickly.
If you’re looking for something more in-depth, you can also look for YouTube videos on the topics you want to learn more about.
However, you should be mindful of who you’re following. Look for qualified experts, such as Certified Financial Planners (CFPs) or Certified Financial Advisors (CFAs). It’s also a good idea to compare advice from different sources to get a variety of viewpoints and help you form your own judgments.
Gaining first-hand experience
A good way to learn financial literacy is by gaining first-hand experience. Being active in your finances can help you learn budgeting, expense tracking, and monitoring your financial statements from banks and lenders. You can apply the previously learned concepts to help you better understand how finances work.
Speaking with a financial expert
A financial advisor can look at your personal finances, offering advice tailored specifically to your financial situation. An advisor can help with both short-term and long-term financial planning. They can also explain concepts to you that you don’t fully understand.
Consider speaking with friends and family to find a trustworthy advisor in your area.
Improving your financial literacy is an ongoing process
Managing your personal finances is no easy task. Whether you’re looking to make short-term changes, like cutting back on overspending, or long-term changes, like setting up your retirement accounts, there are always things you can do to improve your financial health.
Part of improving financial health is understanding the jargon. This is known as financial literacy. Boosting your literacy can help improve your money management and ultimately improve your financial situation.
There are many resources available to improve your financial literacy. Examples include reading a book, listening to a podcast, or speaking with a financial advisor.
Another option is to subscribe to a financial newsletter, like the one offered by Tally. Subscribe to Tally’s newsletter today to receive the latest financial information and tips in your inbox.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.