Why is financial literacy essential in life? Financial Literacy: The answer you need to know

Have you ever wondered that from the moment you wake up until you close your eyes, everything you do is related to money? Earning from work, spending, investing, and saving. The problem is that most people are not educated about Financial Literacy in school, which leads many adults to find themselves unprepared to manage their finances.

Financial Literacy is not as difficult as you think

Financial Literacy simply means the ability to understand and control your own finances, from budgeting, debt management, investing, to preparing for the future. This skill is not innate; it must be learned and practiced continuously.

Warren Buffett’s words say it best: “If you buy things you don’t need, you’ll soon have to sell things you do need.” The meaning is that reckless spending will inevitably lead to financial problems.

5 Key Components That Build the Foundation of Financial Literacy

1. Budgeting

The first step is to know where your money goes. Creating a budget helps you see an overview of income and expenses, or manage accounts with good returns.

2. Saving money

Saving is not just setting aside reserve funds but building security for yourself. Research suggests saving 3-6 months of living expenses as an emergency fund.

3. Investing

Once you have savings, the next step is to make that money work for you. Investing in funds, stocks, or bonds can increase wealth over the long term.

4. Debt management

Not all debt is harmful, but you need to know how to manage it well. Paying debts on time and avoiding high balances can save a lot on interest.

5. Understanding taxes

Taxes affect your net income. Understanding what rights you have can help you save more money.

Benefits of having Financial Literacy

Prevent serious mistakes - Variable interest loans can be risky, but if you understand the terms clearly, you can avoid them.

Be prepared for financial crises - Unemployment or unexpected expenses won’t ruin your life if you have sufficient savings.

Achieve life goals - Whether buying a house, traveling abroad, or further education, all are possible when you have a clear financial plan.

Build confidence - Knowing how your money is managed will give you peace of mind and reduce stress.

Real-life example: SomSri and her transformation

SomSri just graduated a year ago. Her starting salary is 20,000 THB. She decided to practice Financial Literacy as follows:

Step 1: Create a budget
SomSri records all income and expenses—rent, utilities, food, entertainment—and allocates 30% of her salary to a savings fund.

Step 2: Open a high-yield savings account
She searches for a savings account with excellent interest rates to grow her savings faster. In the first year, her savings reach 72,000 THB.

Step 3: Learn about investing
SomSri begins studying the stock market and investments. She joins online workshops and opens a demo account to practice trading with virtual money.

Step 4: Plan for the future
She sets clear retirement goals, calculates how much to save monthly, and starts investing in low-cost index funds.

By applying Financial Literacy, SomSri can manage her money efficiently and clearly sees her path toward financial wealth.

Financial Literacy and the stock market: How to proceed?

The stock market is where investors buy and sell shares of companies. Before entering, you need to understand the basics:

Learn how it works - How does the stock market operate? What is a broker? For beginners, start with platforms that have user-friendly interfaces and offer free demo accounts.

Set goals and diversify - Don’t invest everything in one stock. Diversifying your portfolio helps reduce risk.

Learn risk management - Set stop-loss orders, understand price movements, and stay updated with news.

Understand stock price fluctuations - Company performance, global economy, and news events all influence prices. Fluctuations are normal.

5 ways to develop your Financial Literacy today

Study from online resources

Websites, apps, podcasts, and video tutorials offer various learning paths. The key is to ensure the sources are trustworthy.

Consult professionals

Financial advisors can give personalized advice, helping you make thoughtful decisions.

Prepare for risks

Build an emergency fund equal to 3-6 months of living expenses. This provides great confidence.

Plan for retirement

Start early. Calculate how much you need and find suitable assets to reach that goal.

Reduce expenses or increase income

Both options will help you save more. Identify unnecessary expenses and cut them out.

What do global statistics tell us?

The international organization OECD conducted a survey on financial literacy levels across countries. Thailand scored 71 out of 100, indicating that Thais tend to focus on long-term planning but still have room for improvement.

Summary

Financial Literacy is not a luxury but a necessary skill in today’s world. When you understand finance, you reduce stress, increase confidence, and better achieve your goals.

Getting started is not as hard as you think. Take it step by step, one thing at a time. The more you practice, the more this skill will develop, leading to real financial wealth.