Financial Literacy and Education

Financial Literacy

• Financial literacy is the ability to manage one's finances effectively, including budgeting, saving, and investing.
• It involves applying financial knowledge in real-life situations to achieve financial security and wealth.

Elements of Financial Literacy

• Savings: earning more than spending, and allocating the difference between income and expenses.
• Budgeting: allocating expenses and tracking them.
• Investing: putting money into assets to generate returns.
• Time value of money: considering changes in value over time, including inflation, risk, and foreign exchange.
• Debt management: managing debt financing.
• Retirement planning: planning for long-term financial security.
• Estate planning: planning for the distribution of assets after death.
• Charity: giving back to society.

Financial Literacy Basics

• Assets: things that put money in your pocket, such as current and non-current assets.
• Liabilities: things that take money out of your pocket, such as payables and tangible assets.
• Rich people buy assets, while poor people buy liabilities.

Types of Assets

• Appreciating assets: increase in value over time.
• Depreciating assets: decrease in value over time.
• Self-liquidating assets: assets that can pay for themselves.

Business and Investing

• Mind your own business by acquiring assets that generate income, such as stocks, bonds, and real estate.
• Keep and build your assets strong to generate more income.
• Buy luxuries last.

Financial IQ

• Financial IQ consists of four broad areas: accounting, investing, understanding markets, and law.
• Accounting: financial literacy, ability to read and understand financial statements.
• Investing: science of money making, involves strategies and formulas.
• Understanding markets: science of supply and demand, technical aspects of markets.
• Law: awareness of accounting, corporate, and national laws and regulations.

Risk and Investing

• Risk appetite: tolerance for variability in returns.
• Risk taker: willing to take higher risks for higher returns.
• Risk-averse: prefers lower risks and lower returns.
• Risk-neutral: balanced approach to risk and returns.

Types of Assets

• Real assets: physical substances or compositions, such as real estate, jewelry, and collectibles.
• Classification of real assets: physical, including real estate, jewelry, precious metals, collectibles, artworks, and antiquities.