Financial education can be defined as the study of the principles of money, or it can also be defined as the understanding of money. This article is written to know the reason why we study money and it's principle.
Why it is important for man to have financial Education. Below are some of the importance of financial Education.
Spending prudency:
This simply means been discreet, careful or sensible about the way one spend money. When one has gone through financial Education such person becomes more sensible to the way he or she spends money.
They don't spend money on irrelevant things. They ensure to spend more on their need and less on their want. For example when one is in need of an equipment for his workshop and is also craving for a shoe at the same cost of the equipment needed, the knowledge of financial Education will make the person go for his need which is the equipment which is more important.
Debt free:
Financial education saves one from being in debt. Alot of people run into debt because they lack financial Education. They fail to plan and spend according to their income which prompt them to take loans.
Also most people don't take loan for businesses they take loan to buy material things which won't yield profits. Financial education makes one to understand the principle of loan i.e one should only take a loan if there is a payback plan, this is why banks ask for collateral before giving loans so as to see if the person can pay back.
In short words financial education make one know that without a payback plan loan shouldn't be taken.
Budget planning:
a budget is been made when one has undergone a financial education. The person would have calculated his income for that month or week and make a budget to ensure one doesn't spend unnecessarily, and also to know ones priority. This budget also helps so one can cut the cost of somethings if the list been made is long and the income can't meet up with the calculated amount.
Saving:
financial education teaches people on how to save for the rainy days. It teaches them to save their excess money and not to spend on things that are not neccessary. There are 3 types of saving the emergency savings, investment savings and the purchase saving.
a. Emergency savings: this type of saving is done for emergency situations, for example when one is in need to pay an hospital bill or an urgent fee at school, work etc.
b. Investment savings: this saving is done so as to use the money accumulated for a business or to venture into a business.
c. Purchase saving: this saving is done when one needs to buy an item but the money isn't available at the moment. Then the person saves gradually till the money is complete so as to get the intended item.
Financial education teaches how to save and also be determined about not using the savings for what it is not meant for.
Investment: investment is the putting of a certain money called capital into a business so as to yield profit.
This is another importance of financial education, to enable one know the essence of investing. Financial education also teaches the investor on how to venture into the right business and how to make research about a certain business before going into it so as to reduce the risk of going into loss. It also helps to teach ways in which the investor can get more profit from the business which is to be invested into.
Investment might not be business alone, there are 2 types of investment which are.
I. Business investment: this investment is associated with putting capital in a business or a to start up a business with a certain money.
This type of investment has risk involved, there are times when loss will be incurred in this type of business.
ii. Self investment: self investment is the act of investing in oneself. Just like when one goes for a financial education. This is a form of self investment. Reading of books related to ones purpose is also another form of self investment. Etc..
Source of income:
when one is done with financial education it helps as a source of income for the person. When the person who has undergone a financial education completes the course it makes one eligible to teach others about the course. The person will charge the students a token for the course which will serve as another source of income for him or her.
Listed above are some of the importance of financial education.
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