Growing up in a typical African home, the only job you are entitled to do is to read your books and finish your homework. With the issue of books, you are limited to the ones that are being required by the school for that academic term.
The only chance you could get was to read more from the school library; and even with that, most of the shelves were filled with storybooks written by African writers – but books that could change the mindset of young people were rare in most school libraries.
Today, thanks to technological advancement, there are many topics you can read online to gain an in-depth understanding. Currently, we live in a world where things are becoming complicated and easy at the same time.
Technology is moving at a very fast pace, making most corporate institution and individuals to operate online. In a few years to come, most African businesses will be engaging their products and services online – which will affect transactions as well. Gradually, the cashless system will be in place and people will have no option but to operate transactions by going digital.
Is there a need for individuals to learn more about financial literacy? This is the only subject that I can confidently write that no educational institute has decided to add to academic curricula. Maybe it is not relevant; and thinking that we can get the practical knowledge from home, most children are restricted to basic house chores.
What awaits us if a majority of the Ghanaian population has no idea of what it entails to be financially literate? The answer will be obvious, and since knowledge is power, most people will be powerless when they go through financial recession.
There is no particular definition of financial literacy, but basically it is the understanding of concepts which include debts, investments and savings which leads to an overall sense of financial well-being and self-trust. If you are financially literate, you have power and control over your finances in terms of allocating your income toward your various financial goals – if you have any. The importance of tracking your expenses through the use of budgeting gives you the knowledge of knowing how you spend money on a daily basis.
However, in order to improve on our financial management skills, and get a deeper understanding on how one must be held accountable for their finances whether he is progressing or regressing, there are components in relation to financial literacy which an individual must have under their belt to make wise financial decisions.
Understanding the Basics of Budgeting
One must understand what it takes to create a personal budget. You don’t need a qualification in any financial institution before you get the basics of budgeting. Living in a digital era and with the help of social media, there are user-friendly budgeting tools that will help anyone who wants to track his expenses on a daily basis.
If you are willing to research enough and live a healthy financial life, then you have to be disciplined enough to track your progress and be accountable for whatever comes in and goes out. For instance, if you work a 9-5 job and you get your salary at the end of the month, with a user-friendly tool and proper utilisation of the budgeting tool you will know how to allocate your fixed and variable expenses.
Making Savings a Priority
Before the global pandemic, it was estimated that most people couldn’t save a small percentage of their income due to excess spending and lavish lifestyles. Some were also in a spiral of debt and couldn’t afford to make a living. With the help of some financial social media influencers and certified financial coaches, the need to prioritise savings is gradually becoming the new norm.
After the pandemic, people who lost their jobs and couldn’t afford to make payments have realised that saving for emergencies will help them make better financial decisions. If you are looking forward to making a bigger purchase or retiring early, you can set small financial goals by making small progress through deciding what amount you would like to save in a bank. It could be GH¢500, GH¢200 or even as low as GH¢50, depending on what your goals are.
Understanding Interest rates
At a point in our lives, we go through financial difficulties; and at times if care is not taken, we might do the worst. Having knowledge of what interest rates are about in terms of borrowing money and paying much more on the principal amount will enable you to have a better understanding on what your needs and wants are.
If you really need the money to invest in business, then you will definitely know that you have to work extra hard to pay the money back on time. Also, if you have invested your money with any financial institution – depending on their banking policy and the interest rates – you will be getting additional interest on the principal amount you invested based on a period of time.
Globally, every individual has a debt to pay. It could be mortgage, student loan, credit card, business loan, auto loan and many more. Before making a bigger purchase, it is easy to acquire the loan since a part-payment of 10% or 20% is deposited. However, over time, the economic performance of a country can affect the finances of people – therefore leading to recession. Some people are laid-off and are unable to make loan repayments. With time, the loan accrues interest; making it even more difficult to make payments.
In a recent article published online on the Ghana Web, Aaron Kumah – a Finance and Management expert, said some banks don’t offer mortgage financing; and the few ones with mortgage options are very expensive. Due to the high interest rates on these mortgages, as a salaried worker you will not be able to save money for future purposes; thereby causing you to dip into your retirement savings.
As a salaried worker, you will have to understand – once you make a major purchase or take a loan from the bank – what the necessary steps to take are in order to make payments. Your payments can be either avalanche or snowball payment method.
Making good use of your time to learn more about personal finances gives you the upper-hand to be self-disciplined and accountable to yourself when setting financial goals. We should all understand it is significant to learn more about finances, and learn on how to make better financial decisions to see more improvements in our lives.