Oftentimes finance is a concept that sounds intimidating to many people. The broad term can certainly sound scary, however it is incredibly important that you also understand the basics of financial literacy – even as a teenager – instead of just the aspiring future finance bros.
Financial literacy essentially is having the knowledge, skills and ability to make informed financial decisions. This could be compared to something like choosing what university you want to apply to. It would be crazy to make such a life changing decision without knowing about the university you are considering, tuition fees, campus life as well as what other universities are offering. Without this knowledge, making the decision would be more challenging and there is a higher risk of you not being satisfied with your choice.
In terms of finance, financial literacy is the knowledge you must understand before beginning to make financial decisions in your life including things like budgeting, saving, investing, interest and credit. One large factor you have control over now is saving or investing for future goals. For example, instead of blowing all the money you get on your birthday for something you don’t really need, part of this money could instead be put towards a savings account or even invested which would benefit you in the future. The reward comes later but it is worth it.
Did you know that an average of just 11% of transactions in 2025 are made through cash? The dramatic increase in popularity of paying with a credit card instead of paper money makes understanding the concept of credit even more important. Credit score can be built by regularly using a card, paying on time, and spending a small amount of the card’s total limit. Considering future benefits of building credit, a higher credit score can get you access to taking out loans, renting a car and buying a house. Going further, some employers take credit score into account when looking at your application for a job.
Thinking about the dangers of financial illiteracy, being financially illiterate increases the chance of creating debt. This could be caused by poor spending and saving habits or lack of long term planning. Putting this into perspective, the average millennial has around $27,250 in consumer debt. On top of this, if a financial emergency occurs in the future such as losing a job, having an emergency fund or investment skills can help you get back on track and make this obstacle less challenging to overcome.
All in all, financial literacy is for everyone and it is important to understand before going into the world as an adult. The importance of being able to make smart and well-informed financial choices is clear, and should be taken seriously. With the access people have to the internet, learning can be as simple as a quick online search or watching a YouTube video!