What is Financial Literacy? Why it is Important for Students

To ensure a prosperous future, it all begins with your mindset. 

Renowned author Robert Kiyosaki, in his book Rich Dad Poor Dad, emphasises the significance of financial literacy. His work has empowered millions globally, instilling financial confidence and a prosperous mindset.

In Rich Dad Poor Dad, Kiyosaki explores the keys to financial liberty, prosperity, becoming rich, successful retirement and much more.

Kiyosaki explains, “Intelligence solves problems and produces money, but money without financial intelligence is quickly lost”.

This article will dive into what financial literacy means, why it’s important, why students benefit greatly from it, the core principles of financial literacy, and much more!

What is Financial Literacy?

Financial literacy involves understanding the financial aspects of life, knowing how to handle, multiply, and save money. It is the ABC’s of money and a crucial skill for every individual, shaping their relationship with money and influencing future livelihoods.

What is financial literacy to students?

For students, even without substantial earnings, learning financial basics is invaluable. It includes finding income sources, leveraging skills for earnings, and understanding how to multiply even modest incomes. Early exposure to managing and multiplying money can pave the way for financial freedom.

Understanding financial literacy is vital for several reasons:  

• Early knowledge aids in making informed financial choices.
• Financial literacy fosters wisdom and productivity.
• It shapes a prosperity-oriented mindset, promoting sound decision-making.
• Financial literacy equips students to manage money responsibly, preparing them for various life aspects.
• Developing a passion for financial literacy can lead to interactions with successful individuals, accelerating your own success.

Why is Financial Literacy an Essential Part of Education?

Financial literacy is integral to education because finance underpins daily needs for individuals of all ages. Whether you are a student or a professional, buying chocolate or cars, money is changing hands. 

Recognising the importance of money management, saving, and investing at the right time creates wealth abundance. Similarly, financial literacy can help you become more educated, well-read and gain a better perspective on life. It can change your perspective entirely, and you can go from working in Poor Dad logic to functioning in Rich Dad freedom! 

What are the 5 Principles of Financial Literacy?

 Here are the core principles of financial literacy:

1. Earn: Earn well, grow your skill set, and learn about the ways of making the most amount of money with the least amount of effort. In Robert’s own words, the rich make money work for them, they do not work for money.
2. Save for your future: Learn about investments, mutual funds, stock exchange, forex, plan for your retirement, and implement all the other ways of multiplying your money for the future.
3. Spend on gathering assets, not liabilities: According to Robert Kiyosaki, liabilities are expenses that deplete your funds. On the flip side, while an asset may involve some costs, it invariably contributes more money to your pocket than it takes. (Source: Yahoo)
4. Borrow: Manage your credit cards and loans wisely while using them to expand your prospects.
5. Protect: Invest in insurance and safeguard against identity theft.

How to Build Financial Literacy

Building financial literacy is easier than you think.

• Invest in books like Rich Dad Poor Dad, The Richest Man in Babylon, and 10 Investment Mantras of Warren Buffet.
• Sign up for TED Talks or guest lectures on financial literacy. 
• Reach out to teachers or supervisors for guidance. 
• Learn from other successful individuals in finance. 
• Enrol in courses on financial literacy and learn more about essential finance skills. 

A degree in Finance will also help you understand how money works while developing your finance skills, providing a high return on investment (ROI).

If you are looking for a way to invest into your Finance Education in the UK, look no further than The London School of Business and Finance (LSBF).

LSBF is listed among the top universities in the world and is a leading education provider in the finance and business worlds.