Financial Literacy Month

What is financial literacy?

Financial literacy is the knowledge of budgeting, saving and investing, enabling colleagues to make informed decisions about their personal finances.

Five principles of financial literacy

• Earning

• Saving and investing

• Borrowing and managing your debt

• Spending and planning

• Protecting your assets

Earning

Your income is the foundation of your personal finances. It is the basis for your lifestyle and your financial future. 

Implementing the Principle

• Learn to live within your means and pay for your lifestyle without excessive debt.

• Manage your income and workplace benefits. 

• Work out if you can put portions of your income aside for the future. 

Saving and investing

Creating a budget will help you put aside money for savings and investments. This allows you to grow your wealth and can empower you to make major financial plans such as buying a house or paying for retirement. 

Take a look at Salary Finance's budget planner HERE.

Implementing the Principle

• Monitor where your money is going each month.

• Cut out optional expenses for things you can live without and put the money into savings or investments.

• Create separate categories or “buckets” in which you can set money aside for specific goals from holiday presents to vacations to home purchase to retirement.

Borrowing and debt management

Borrowing wisely will allow you to make major purchases while building your credit. This can help you pay for a home, car or a college education. But avoid excessive debt that can eat into your ability to save and invest in the future.

Implementing the Principle

• Carefully weigh major loans to determine if you can afford them — make sure you live within your means.

• Review and compare interest rates before applying for a loan.

• Keep debt to a minimum and easily manageable within your budget.

• Pay your bills on time and make more than the minimum payment.

Spending and planning

When you are paid, consider following the 50-30-20 budget or the 80-20 strategy.

Following the 50-30-20 budget means putting 50% of it toward needs, 30% toward wants and the remaining 20% toward savings and investments. This is one of several personal finance strategies that can help you keep your spending on track.

With the 80-20 budget, you “pay yourself first” by setting aside 20% for savings, then using the remaining 80% for both fixed and variable expenses.

Implementing the Principle

• Shop for the best value when making purchases.

• When making a large purchase, consider whether it is a need or a want and consider whether buying it is within your means.

• Consider “paying yourself first” by making it a habit to set money for savings aside before anything else to shape and drive your budget.

Protecting your assets

You will need to protect your financial assets: savings, investments and your budget. This can take the form of an emergency fund and insurance.

Implementing the Principle

• Think about creating an emergency fund — enough money to pay for three to six months of expenses.

• See if you can purchase insurance to cover risk to yourself and your belongings. Consider homeowners or renters insurance, health insurance, car insurance, disability insurance and life insurance.