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Every adult needs to acquire some basic financial acumen to function effectively in the world. Another name for this is financial literacy. Primarily, this alludes to the knowledge and ability to manage income effectively. Specific knowledge is needed on how to save, how to invest effectively, using credit, obtaining loans, and paying bills.
Below we provide simple explanations of these key areas of money management you need to understand. It is important that the reader continues to read up on these and other financial topics to keep growing knowledge and being able to make sound financial decisions. This must be supported by mature actions with regard to money in the short and long term.
Open a Bank Account
Everyone needs a bank account. This allows your employer to directly deposit your weekly or monthly wages or salary. A bank account opens up channels for borrowing money or getting credit. You can pay bills online from your bank account using a desktop, tablet, laptop, or smartphone. An account also provides you with a savings feature. The Federal Deposit Insurance Corporation (FDIC) insures saving account funds for the value of the amount held in the account for up to $250,000. A savings account will gain you interest.
How to Save
You can open a separate savings account, distinct from your normal bank account. This makes it harder to simply transfer savings over to the banking side to use immediately. You should also set up an automatic monthly or weekly payment to your savings account.
One way to avoid easily spending your savings is to open a fixed period account, for example a 32-day account. This means you need to give the bank 32 days’ notice before the money becomes available. If you are one of those people who battles to save, this option can help you build up a nest egg for rainy days.
Many people are aware of investing in annuities to save for their retirement. An employer may arrange for a financial advisor to assist all employees, who are then free to invest a portion of their monthly income, often matched by a contribution from the employer. The principal investment accrues interest, and the annuity pays out at retirement. Tax works on annual amounts and not the core amount.
You can also conduct speculative investing, where the returns are not guaranteed. Some people make it big, and others go bankrupt. Remember that the lower the risk of losing money, the less you are likely to earn from the investment.
Credit and Loans
Your bank may approve you for a personal loan that can be used to buy a second-hand car, pay for surgery and hospitalization, or even a holiday. Just remember that every loan comes with an interest portion that must be paid in addition to the actual loan amount and a service or admin fee.
Avoid applying for numerous credit cards as each one accumulates debt. The same applies to loans. You should ensure that you do not take out monthly loans to get through the month as this soon becomes an endless cycle.
There may be times when you need to send money to family members abroad. However, international transfers using your bank account can be costly. Instead, you’ll want to use a money transfer service that allows you to send money safely and quickly, with lower fees. Compare options such as a Ria Money Transfer to see what they charge and how quickly they get a transfer done.
Take control of your money by making a habit of reading something new on finance management every week.
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