Financial literacy is essential for making informed decisions about money, yet new research by ASIC’s MoneySmart found that financial literacy rates in Australia are declining. This lack of knowledge can make managing finances more challenging and stressful. Thankfully, improving your financial literacy doesn’t have to be overwhelming. By mastering a few key concepts, you can take control of your financial future, and it starts with understanding how to earn, spend, save, invest, borrow, and protect yourself from scams.
Spend and earn: The power of budgeting
One of the first steps in managing your finances effectively is understanding where your money goes. Creating a budget is an essential part of this process. With a clear view of your income and expenses, you can make smarter choices about your spending. Use our helpful Budget Planner to help you track your income, set realistic spending limits, and identify areas for savings. By using a budget planner, you’ll gain a better understanding of your financial habits, which is key to building long-term financial stability.
Save and invest: Building wealth safely
Saving is the foundation of financial security, ASIC's MoneySmart suggest Australians build a savings buffer of around 3 months of expenses that can be used in the event of an emergency. Having a savings buffer may help you to avoid financial stress if an unexpected bill were to come up.
Investing wisely may help grow your wealth over time. One option you may choose may be a term deposit. A term deposit is an investment that allows you to lock away your money for a set period at a fixed interest rate, ensuring you receive predictable returns. It’s perfect for those who are just starting their investment journey or prefer a more stable option. When you are ready to explore other investment options, we recommend you continue to build your financial literacy skills through various resources, such as ASIC’s MoneySmart, and speak with a financial planner.
Borrow: Borrowing wisely
When it comes to borrowing, it's important to understand the terms of any loan you're considering. This means knowing the interest rates, loan duration, and repayment schedule. Before borrowing, make sure the loan amount fits comfortably within your budget. It’s crucial to ensure you’ll be able to meet your repayment obligations without putting unnecessary strain on your finances. Always take the time to read through the loan agreement carefully and seek professional advice if you’re unsure about any of the terms. Borrowing wisely can help you avoid financial stress and build a positive credit history. We have a variety of helpful calculators to ensure you know your borrowing power and can plan your repayments. Our helpful Personal Loan Glossary can help you to demystify loan terms, so you can borrow confidently.
Protect: Stay scam aware
Scams are unfortunately a growing problem, with many Australians falling victim to fraudulent schemes. Protecting yourself from scams is a key aspect of financial literacy. Be cautious when sharing personal information, especially online, and always verify the legitimacy of offers before making any decisions. Scammers are skilled at creating convincing messages, so it's important to remain vigilant. If something seems too good to be true, it probably is. By staying informed and aware, you can better safeguard your finances and personal details. Learn more about common scams to ensure you know how to recognise a scam and what to do if you think you may have fallen victim to a scam.
Building on your financial knowledge
These concepts, spending and earning, saving and investing, borrowing responsibly, and protecting yourself from scams, are the building blocks of financial literacy. Mastering them will put you on a path to better money management. Financial literacy is a lifelong journey, and there are plenty of resources to help you along the way, such as the ASIC’s MoneySmart website. Keep learning to take control of your financial future.
