Many young adults overlook financial literacy, a fundamental life skill that helps to make sound financial decisions.
Young adulthood is a crucial developmental period in the course of life. This is the time when most individuals step out of structures, they are familiar with, for example, their schooling, and college, among other areas, and assimilate into independent members of society. In a nutshell, this is a time of dramatic change in basic thinking structures.
The developmental stages of young adults include achieving autonomy, trying to establish oneself as an independent person, and developing a sense of self. Young adulthood is a time between adolescents’ reliance on parents and adults,’ and long-term commitments to love and work, and during these years, emerging adults focus on themselves as they develop the knowledge, skills, and self-understanding they will need for adult life.
Shouldering the monumental task of developing into functional members of society, most people skip or overlook the importance of financial literacy in this critical stage of transition to adulthood.
What is financial literacy?
Financial literacy is the ability to understand and use various financial skills, including personal financial management, budgeting, and investing. Lack of literacy in handling one’s finances will lead to impaired decision-making in the future, and this could prove to be detrimental as economic instability rises and creates preventable roadblocks in their progress.
Financial literacy is an important life skill for young adults for several reasons, including:
1. Empowerment: Financial literacy empowers young adults with the knowledge and tools they need to make informed financial decisions. This includes understanding how to budget, save, invest, and manage debt. By having a strong foundation of financial literacy, young adults can support various life goals, such as saving for education and/or retirement, using debt responsibly, and running a business.
2. Recovering from financial crisis: Financial literacy leads to greater resilience during predictable and unpredictable life events. Learning how to earn, spend, save, and invest wisely contributes to overall well-being and stability. Financial literacy can help young adults avoid debt and build assets, which can help them become more resilient.
3. Breaking the opportunity gap: Investing in financial literacy helps bridge the opportunity gap that exists in underserved communities and empowers youth with the tools they need to break the cycle of poverty.
4. Better financial habits: Financial education can help eradicate poor financial habits and replace them with more appropriate habits. By learning about budgeting, saving, investing, and managing debt, young adults can develop better financial habits that will serve them well throughout their lives.
5. Improved career prospects: Financial literacy can improve career prospects by enabling individuals to make informed decisions about job offers, negotiate salaries, and plan for retirement. By having a strong foundation of financial literacy, young adults can make informed decisions about their careers and build a solid financial foundation for their future.
In conclusion, financial literacy is an important life skill for young adults because it empowers them with the knowledge and tools needed for making informed financial decisions, avoiding debt, building assets, and becoming more resilient. It also helps bridge the opportunity gap that exists in underserved communities and gives young adults the confidence to manage their finances and make sound financial decisions. By understanding financial concepts like saving, investing, and debt, young adults can establish a feeling of control over their finances while also using money as a tool to freely make choices that lead to greater life satisfaction.
