Why Financial Literacy is More Important Than Ever
April is Financial Literacy Month. What exactly is financial literacy and why is it important?
The FINRA Financial Literacy test covers basic financial concepts such as:
- Inflation
- How compound interest works
- Investment strategies
- Diversification
- Bond prices
- Debt-to-income ratio
Why is it important to understand these financial concepts? People with a high financial literacy score make better financial decisions and have a brighter financial future.
Compound Interest
Most of us start our careers in our twenties full of optimism and without much thought of our financial future. There’ll be time for that later, we think. Retirement is not usually the first thing we think about when we get our first paycheck!
“Understanding these concepts of financial literacy can change your financial future,” explains Gary Isler, Senior Vice President Investments for David Lerner Associates.
How is it possible that one young American with financial smarts can buy a house, build an investment portfolio, and plan to retire with more than a million dollars while another struggle for forty years and ends up with no savings? It’s all in the planning and execution of a sound financial strategy based on understanding these financial concepts.
Once you undemand how compound interest works, you will realize that time is your greatest asset. The longer your money is earning interest, the faster it grows. So, if you start in your twenties, you’ll have much more than if you were to start saving in your forties.
Inflation
For the past forty years, inflation has not been a major factor but since the pandemic, it’s raised its ugly head once again. We’re now at the highest inflation rate in forty years! SO, it’s vital to get your wits around exactly what this means for your financial future and how to protect your investments against rapid inflation.
Talk to a financial advisor today and prepare an informed strategy for your financial future.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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