Learning Financial Literacy: The Skills Schools Don't Teach
Let’s be honest: most of us left school knowing how to solve algebraic equations but clueless about filing taxes, managing debt, or investing wisely. Schools taught us about mitochondria being the powerhouse of the cell but skipped over how to budget our powerhouse of income.
The result? A generation of adults struggling with credit card debt, living paycheck to paycheck, and wondering why no one ever told them how interest rates work.
In this guide, I’ll walk you through the essential financial skills that schools don’t teach but should. Whether you’re just starting your financial journey or looking to level up your money game, this is for you.
What To Expect In This Post?
Schools don’t teach financial literacy, but it’s crucial for success. Learn how to budget, save, invest, and build wealth with these essential money skills.
- Financial Skills Schools Don’t Teach.
- Personal Finance Education
- Managing Credit And Debt
- Budgeting For Beginners
- Investing For Beginners
Why Schools Don't Teach Financial Literacy
Many education systems focus on academic knowledge rather than real-world skills. The assumption is that parents will teach their children about money, but the problem is: if the parents never learned it themselves, the cycle continues.
On top of that, financial institutions thrive on consumer ignorance. The less you know, the more likely you are to rack up credit card debt, take out bad loans, and make poor financial decisions that benefit banks and lenders.
But the good news? You can break the cycle. And it starts now.
Essential Financial Literacy Skills
1. Budgeting: The Foundation of Financial Stability
Budgeting isn’t about restricting yourself; it’s about making your money work for you. A good budget ensures that your essentials are covered while allowing you to save, invest, and enjoy life.
How to Create a Budget:
- Calculate your total income (salary, side hustles, passive income).
- List all your fixed expenses (rent, utilities, loans).
- Track your variable expenses (groceries, entertainment, subscriptions).
- Set savings goals (emergency fund, investments, travel).
- Review and adjust monthly.
Popular Budgeting Methods:
- 50/30/20 Rule: 50% for needs, 30% for wants, 20% for savings.
- Zero-Based Budget: Every dollar has a job—no unallocated funds.
- Envelope System: Cash-based spending categories for better control.
2. Understanding Credit and Debt Management
Credit can be your best friend or your worst enemy. Used wisely, it can help you buy a home, start a business, or build wealth. Mismanaged, it can drown you in debt.
Key Concepts:
- Credit Score: A three-digit number that determines your financial trustworthiness.
- Interest Rates: The cost of borrowing money—lower is better.
- Debt-to-Income Ratio: A key factor lenders consider before approving loans.
Pro tip: Always pay more than the minimum balance on credit cards to avoid high-interest charges.
3. Saving and Emergency Funds
If you don’t have at least three to six months’ worth of living expenses saved up, you’re one unexpected bill away from financial disaster.
How to Build an Emergency Fund:
- Start small—aim for £500, then build from there.
- Automate savings—set up automatic transfers.
- Cut unnecessary expenses and redirect that money into savings.
4. Investing: Making Your Money Work for You
Savings accounts alone won’t build wealth. Investing is key to long-term financial security.
Beginner-Friendly Investment Options:
- Index Funds: Low-cost, diversified investments with long-term growth potential.
- Stocks: Owning shares in companies.
- Real Estate: Rental properties and REITs.
- Cryptocurrency: High risk but high reward if done wisely.
Remember: The earlier you start investing, the more you benefit from compound interest.
5. Understanding Taxes
Taxes are inevitable, but overpaying them isn’t. Knowing how to legally reduce your tax burden can save you thousands.
Key Tax Concepts:
- Tax Brackets: Understand where you fall.
- Deductions and Credits: Reduce taxable income.
- Retirement Contributions: Tax advantages for saving for the future.
Use tax software or hire an accountant to ensure you’re maximizing your savings.
6. Retirement Planning
It’s never too early to start thinking about retirement. The sooner you start, the less you’ll have to contribute later.
Retirement Savings Accounts:
- 401(k) / Workplace Pension: Employer-matched contributions.
- Roth IRA: Tax-free withdrawals in retirement.
- Self-Invested Personal Pension (SIPP): Great for self-employed individuals.
Make retirement savings a priority—future you will thank you.
7. Insurance: Protecting Your Financial Future
Insurance is like an umbrella—you don’t need it until you do. And when you do, you’ll be grateful you have it.
Essential Insurance Types:
- Health Insurance
- Life Insurance
- Homeowners/Renters Insurance
- Car Insurance
- Disability Insurance
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How to Improve Your Financial Literacy
1. Read Personal Finance Books
- Rich Dad Poor Dad – Robert Kiyosaki
- Your Money or Your Life – Vicki Robin
- The Millionaire Next Door – Thomas J. Stanley
2. Follow Financial Experts
- Dave Ramsey
- Ramit Sethi
- Graham Stephan
3. Use Financial Apps
- Mint (Budgeting)
- YNAB (You Need A Budget)
- Acorns (Investing)
- Robinhood (Stock Trading)
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Final Thoughts: Taking Control of Your Financial Future
Financial literacy isn’t just about making more money—it’s about making smarter decisions with the money you have. Schools might not teach these essential skills, but that doesn’t mean you have to remain in the dark.
Start today. Read a book, listen to a podcast, track your expenses, and take control of your financial future. Your future self will thank you.
