A bank account where you can put your money to save it for future expenses.
The amount, usually expressed as a percentage, that determines how much additional money you pay (loan) or receive (investment) when borrowing or lending money.
Extra money paid to someone else when you borrow money or money that may be paid to you when you have invested money.
The knowledge and skills to make informed decisions about money.
A financial institution similar to a bank and that provides many of the same services as a bank. Credit unions suggest they focus more on their members rather than profits and are an important contributor to their community.
A card that represents a credit agreement. A bank or financial institution may give a credit card that can be used to pay for goods or services before the money is actually deposited in the account. The credit card owner agrees to pay back the borrowed money at a designated time. If full payment is not made on the payment date, interest will usually be charged.
Money that a bank, business, or person allows someone else to use and then pay back in the future.
A piece of paper that you can use to give permission for a bank to give money from your bank account to someone else. You can use cheques instead of cash. Cheques are usually printed by your bank and you fill in the information about who you want to give the money to and how much money you want to give, and then sign it. The amount you write on the cheque is withdrawn from your account, by the bank, and given to the person/business to which you wrote the cheque.
An account you have at the bank where you can deposit and/or withdraw money.
What is Financial Literacy?
So what is financial literacy anyway? It might be easier to understand if you think of financial literacy like financial fitness. When you are financially fit you are able to make informed choices about finances and you understand how your choices are going to impact your wallet and your life. People who are financially fit know how to make decisions that will help them enjoy life and ensure their basic needs are met. Financially fit people plan for their future and can manage financial surprises because they’ve trained for these situations by saving and planning.
When you’re physically fit, you are able to enjoy many activities like running, hiking, playing sports, and playing with your children or grandchildren without getting tired or sore. But people don’t stay physically fit without working at it. You have to make good choices about eating healthy food, getting enough sleep, and exercising regularly. It takes effort; you have to train.
The same is true for financial fitness. To enjoy the benefits of financial fitness, you have to train. You have to obtain information, knowledge and skills and apply them so you can make good choices about how you treat your money and how your money treats you.
Have you ever thought about how you treat your money? Do you like to save it all, afraid to spend a penny? Do you spend it the same day you get it? Do you pay all your bills first and hope you have enough left over for your basic needs?
How does your money treat you? Does it grow in your savings account because your bank pays a good interest rate? Is it magical and disappears quickly? Is it truly cold, hard cash because you keep it in your freezer? Or is it dirty money because it’s buried in your back yard? Don’t laugh. Some people don’t trust banks and have resorted to keeping their money in a freezer or burying it in their yard.
No matter what your relationship is with your money now and no matter what your financial fitness level, this handbook can help you improve both.
Financial fitness is defined as the ability to make appropriate decisions in managing finances.
Am I Financially Literate?
Financial literacy means that you have the skills and knowledge to make informed decisions and choices about how you plan for your future and how you spend and save your money. It’s important that you not only have the skills and knowledge, but that you also apply them! Here are some questions that might help you figure out if you are financially literate:
- Do you know what interest rate you pay on your credit card?
- Do you have money saved in case of an emergency?
- Do you have a handle on your personal finances?
- Have you thought about a retirement savings plan?
If you answered yes to all four questions you are in good shape! Here are some more questions that might help you determine if you are financially literate:
- Are you maxed out on several credit cards?
- Is there more month than money, that is, do you run out of money before you get your next pay cheque?
- Do creditors call you about unpaid bills?
- Have you ever bounced a cheque?
If you answered yes to two or more of these questions, you need to work on your financial fitness. But, don’t worry. This handbook will help you get started and there are lots of people you can go to for more information to help you become financially fit.
Do I Have to Have Lots of Money to Be Financially Fit?
No. People can have lots of money and not be financially fit and people with very little money can still make good financial decisions. How much money you have does not determine if you are financially fit. It’s having the skills and knowledge to make informed choices about what you do with your money that determines if you are financially fit.
By reading this handbook, you are off to a strong start in becoming financially fit.
Good news! By reading this handbook, you are off to a strong start in becoming financially fit. Taking the time to read this handbook shows that you have the desire and willingness to learn more about money and wealth management and that’s important.
The key to becoming financially fit is to build your skills and knowledge about money, savings, spending, credit, investing, and everything else people do with money. Then you can use what you learn to make choices for you and your family that help—not hurt—your bank account.
This handbook will help you learn about all those skills. You can also get more information from websites, books and other helpers, such as people who work at your bank or credit union. Friends and family are also good resources. Has someone in your family made good money decisions? Talk to them! It may help if you make a list of questions you want to ask before meeting with them.
On a final note, remember that having the tools and knowledge is only part of the process. To actually be financially fit, you must also apply that knowledge and change the way you treat your money!
Take the next step: 3 | Cash Flow
Take the next step: 3 | Cash Flow