As the world around us continues to deepen in complexity, to keep abreast of the latest changes affecting our lives, we need to take a proactive approach in learning new skills, educating ourselves, and gaining exposure to new ideas. Doing so will reward us in innumerable ways.
One important area for young adults to focus is learning financial literacy, or absorbing financial knowledge and skills to improve our personal lives through our everyday actions. Formally, financial literacy is the ability to understand issues related to money and how it’s used, especially when it comes to managing your personal finances.
Financial literacy, unfortunately, isn’t an innate skill and is something which requires effort to build. The TIAA Institute found in a 2018 survey that most Americans don’t have “the knowledge necessary to make routine financial decisions.” On a test with basic financial topics, the average adult could not answer half of the questions correctly.
Further, aBank of America survey discovered less than one out of three respondents between the ages of 18 and 26 considered their high school education to have satisfactorily taught them useful financial habits. For most people, if you want to learn how to improve your financial literacy, you need to seek out opportunities to do so.
What follows are several useful financial literacy resources you should consider for improving your money knowledge and skills. Begin first by understanding finance jargon and then proceed to learning more about financial literacy topics through books, courses, podcasts, apps, and other resources. Afterward, we walk through the benefits of financial literacy and learning it at an early age.
Where to Learn Basic Finance Jargon
Before you’ll be able to understand more complex financial literacy topics, there are some basic financial terms you’ll need to learn. One resource that takes seemingly complex financial terms and makes them easy to understand is learn.robinhood.com. A few examples of topics they cover include:
The Robinhood investing app has done a lot to benefit retail investors. Of note, Robinhood has slashed trading commissions to $0, meaning you pay nothing to trade stocks, bonds, or index funds on Robinhood. This free trading extends to more exotic (and complicated) areas like options trading and cryptocurrencies, though these remain items subject for more sophisticated investors.
Additionally, the service offers a Cash Management feature, which acts similar to a high-yield savings account from a company like CIT Bank. Robinhood offers numerous products and services to its customers at low cost or free, making one wonder how does Robinhood even make money?
Well, many of the best Robinhood alternatives have taken note and attempted to replicate its business model. One thing for sure with these numerous brokerages competing on price is that retail investors have come out as the winners. After decades of costly investing, firms like Webull, Acorns, and M1 Finance have managed to slash commissions to $0 and provide their cost-effective services to Millennials who often have small amounts of money to invest at any one time.
For those interested in learning more about many financial literacy topics, consider visiting the learn.robinhood site to see how their explanations can make complex finance topics simple. From there, you may want to sign up for the Robinhood app to learn how to start investing money.
Popular Financial Literacy Books
Books, whether you read a physical copy, an ebook version, or listen to them as audiobooks, are still one of the most effective ways to broaden your financial literacy. There are seemingly endless books fighting to give you financial advice, but the quality is not all equal. These are some of the top finance books people find help them improve their financial literacy.
→ Money Master The Game: 7 Simple Steps to Financial Freedomby Tony Robbins
Robbins’ book states, “Information without execution is poverty. Remember: we’re drowning in information, but we’re starving for wisdom.” If this line resonates with you and you feel overwhelmed with financial research, Money Master would be a good read for you.
Tony Robbins conducted extensive research as well as interviewed prominent investors, such as Warren Buffett, John Bogle, Paul Tudor Jones, and more. He created a 7-step blueprint for how you can secure financial freedom. Robbins gives readers actionable finance advice, such as how to formulate a savings and investing plan, and busts common finance myths.
→ Total Money Makeover by Dave Ramsey
Millionaire Dave Ramsey is no stranger to writing and teaching about finance. Total Money Makeoveris his most notable book and provides seven “baby steps” to help you get out of debt, save money, invest, and more.
This isn’t a book on finance theory, but is instead clear and actionable. You’ll learn the top most dangerous money myths. The book also comes with 50 success stories of people who followed Ramsey’s principles.
→ The Millionaire Next Door by Thomas J. Stanley and William D. Danko
For this book, Stanley and Danko analyzed the habits and behavior of millionaires to see how they spend money, save it, and invest it. From this, they found seven basic rules everyone should follow if they want to accumulate wealth.
Hint: wealth doesn’t necessarily require a high-profile job. Many millionaires didn’t just inherit money, but worked hard and saved most of their earnings. Learn their frugal habits and how wealthy doesn’t always mean flashy.
Top LinkedIn Learning Courses for Financial Literacy
You don’t only have to improve your financial literacy through reading. You can learn through online finance classes as well. LinkedIn Learninghas a variety of finance and financial literacy courses geared at teaching you the basics of different finance topics.
A handful of examples include:
- Financial Basics Everyone Should Know. This course teaches how to use certificates of deposits, leverage brokerage accounts, use Roth Individual Retirement Accounts IRAs and SEP accounts, and more.
- Personal Finance Tips & Tricks. This class discusses financial situations when considering going back to school, paying off student loans, how to ensure you and your partner are financially compatible, and more.
- Managing Your Personal Finances. Here you can learn how to change your attitude about money, maximize your earning potential, understand your credit score, and more.
- Finance Foundations. After this course, you’ll be able to describe the operating cycle, name the benefits of keeping fixed costs low, compare stock index funds to corporate bonds, and more.
- Understanding Capital Markets. This course teaches what call and put options are, the process of stock valuation, the difference between shorting stocks and going long, and more.
Once you’ve taken some beginner courses, you can continue with intermediate and advanced classes until you feel confident in your financial knowledge.
Best Podcasts for Building Financial Literacy
Do you prefer just audio over video? You’re in luck because there are plenty of finance-related podcasts available for improving your financial literacy. You may want to check out some of the following:
- The Dave Ramsey Show
- So Money with Farnoosh Torabi
- Smart Passive Income with Pat Flynn
- Money For the Rest of Us with J. David Stein
- The Disciplined Investor with Andrew Horowitz
Consider trying out a few podcasts to see which type of style you prefer. You can listen to these while you do other tasks to pick up a bit of financial advice while not putting in as much effort as a course, or even reading a book, would take.
Finance Apps that Improve Your Financial Literacy
Today, many apps help you to learn about your personal finances as well as finance in general. This includes topics like budgeting, spending control, saving, debt management, credit score understanding, investing and more.
Millennials have taken most of their lives online or in their hands, literally, with smartphones. As a result, several useful apps have come onto the market designed to improve financial literacy one action at a time. Take a look at some of the most popular apps available for guiding you down a better financial path.
Pocketsmith helps you to control your current spending habits as well as see what your financial future looks like with your current spending and earning patterns. The app helps you to learn more about your personal finances by having you organize them in an understandable manner. By shedding light on your financial picture, Pocketsmith can help you get to where you want to go.
Pocketsmith works by starting with your past and building an understanding of your spending patterns and behavior so you can identify areas to target for improvement. From there, it shows your present actions through bank transaction feeds to help see immediate steps you can take and how you progress.
Finally, after enough data has been gathered by the app, Pocketsmith allows you to look into your financial future, whether that is 6 months or even 10 years from now. By extrapolating decisions you make today into the future, the app can forecast your financial picture if you continue to make financially literate decisions.
→ Meet Tally
MeetTally acts as an automated debt manager working on your behalf to lower your credit card payments. It does so by monitoring your linked credit cards and assessing your payment history to understand if you’d be better served through consolidating your high cost credit card loan with a loan from Tally.
Essentially, Tally acts as a credit card consolidation app, which makes it easy for you to stay on top of your credit card balances. It does so by offering you a line of credit with a lower interest rate than you likely paid on your credit cards. This arrangement makes it easier to save money, manage your cards and pay down balances faster.
The app keeps track of bank and store credit cards, meaning it tracks your due dates, minimum payments and APRs. Based on this information, Tally calculates the best payment strategy for paying off your credit cards every month.
As an additional feature of the app,Tally offers late fee protection to prevent overdraft fees or other costly charges credit card companies might assess for a late payment. So long as you remain in good standing with Tally, you won’t need to confront a late fee on a linked credit card again.
→ Credit Karma
Credit Karmapairs well withTallyto monitor your credit score as you make timely payments and reduce your credit utilization rate. This information can be useful when it comes to finding a mistake on your credit report and wanting to take action to resolve the problem. By identifying this issue early, you may prevent yourself from suffering serious damage had this error remained on your credit history for years and gone uncontested.
Further, Credit Karma provides monitoring alerts if something unexpected happens or you have an event occur which might impact your credit. Credit Karma sends you alerts if anything major impacts your credit like an inquiry, a late payment, or some other event impacting your credit. Having access to this information on a timely basis can help you to build and manage your credit for your gain.
To make money, the service offers you free access to their credit scoring and monitoring services and offers you tailored credit card and loan products they believe might suit your needs. In exchange for providing you the free credit services, they have monetized their service through these affiliate offerings.
By pairing Credit Karma with an app like Tally, you can steadily see your credit score improve alongside your personal finances, allowing financial opportunities to open up to you.
has become a very popular financial wellness app with Millennials. The service comes for free if you are enrolled as a student using a .edu email address or are under age 24. This benefit makes the app a great fit for young adults beginning their investing journey and learning how to make smart financial decisions with their money.
Typing your typical spending behavior to investing could should the interconnection of your financial actions and why you should always make sure to set aside money for the long-term through investing. Even if it only starts as a small amount contribution by contribution, with enough time and patience, the tiny acorn can grow into the mighty oak.
The main feature ofthe ability to connect a debit or credit card and have the app “round up” your purchases and invest that money automatically on your behalf. To grow this investment account quicker, you can also establish automatic deposits.
Finally, to leverage those “round up” purchases, Acorns offers a “found money” feature where additional money deposits into your account when you shop with Acorns’ partners.
→ M1 Finance
offers to simplify investing with its robo-advisor functionality. The service does not charge fees for managing your assets, but rather, makes money from offering other services or earning interest on un-invested cash.
allows you to select the specific stocks and
M1 Finance also offers the ability to buy fractional shares, meaning if your desired stock carries a high share price (e.g., Google, Amazon, Berkshire Hathaway Class A, etc.), M1 Finance allows you to a smaller fraction of the stock on the platform.
As you have your account
To learn more about other useful apps for empowering you to make better financial decisions, I also have a full list of today’s top financial apps for smarter money management. Further, consider reviewing that list as well as the best investments for young adults to improve your financial literacy.
Other Financial Reading Resources
The United States government wants to help its citizens learn more about personal finance. Therefore, congress made April “Financial Literacy Month,” and there are financial resources available on government websites. Check out MyMoney.gov for a variety of financial resources.
This site contains sections geared towards youth planning for the future, educators looking for lesson plans and teaching tips, and researchers wanting datasets and research reports.
Once you have developed your base understanding of finance, you can increase your finance knowledge by reading the finance sections in newspapers.
Billionaire Warren Buffet usually reads six newspapers each day. These typically include The Wall Street Journal, The New York Times, USA Today, The Financial Times, The Omaha World-Herald, and American Banker. It can benefit you to read both about local and global finance.
Benefits of Financial Literacy
→ 1. Promotes Self-Sufficiency and Financial Stability
Stated simply, possessing even basic financial literacy helps people to become self-sufficient and able to achieve financial stability in their lives. Such actions include saving money, distinguishing between simple wants and needs, managing a budget and debt burden, paying their bills in a timely manner, buying a house to call home, financing a college education, and planning for a safe and secure retirement.
→ 2. Makes Sound Financial Decisions
Financial literacy provides people the chance to create a reasonable and realistic roadmap which can take them through their daily lives and routines and lead to sound financial decisions.
→ 3. Empowers People
Further, financial literacy empowers people with better tools and financial resources at their disposal. By developing an understanding around financial literacy topics like credit, interest rates, and investments, people find them less intimidating. This leaves informed people at an advantage as compared to those who lack this basic financial understanding.
However, this does not require a population of well-heeled financial specialists. Instead, simply understanding the basics can motivate people to ask questions and find the best options available. Some common areas of personal finance people would want to understand conceptually include:
- how interest rates work,
- how saving money can compound over time,
- the differences between stock and bond investments,
- the primary factors determining your credit rating
→ 4. Reduces Stress
By having a solid handle on these basic topics, this will also go a long way toward decreasing the stress level of individuals. When people are well versed and understand the current state of their personal finances, this provides them with the information they need for taking action, modifying their investment portfolio, or continuing with their current strategy.
→ 5. Guards Against Fraud
Another benefit of financial literacy comes from reducing the risk of becoming a victim of identity fraud. Through understanding your finances better, you can quickly identify red flags for garden-variety fraud. Some tactics might come across as easy to believe or too good to be true and will sound the alarm in your head when you see how out-of-sync these claims being sold or offers being pitched might be. They likely are and are usually just meant to get you to surrender your financial information.
Having enough knowledge of financial topics can help you to recognize these red flags and seek out help from a trusted advisor before moving forward with any offer or solicitation.
As you build this financial foundation and begin to see results, consider monitoring your progress through a free net worth tracking app like Personal Capital. The app provides a comprehensive net worth tracking dashboard including breakouts of investments, bank accounts, credit cards, liabilities and real estate assets. Simply connect your financial accounts and see how it builds a detailed breakdown of your net worth and monthly cash flows.
Learning Financial Literacy at an Early Age
When it comes to learning, you continually build on the knowledge and information you have gathered and learned in the past. The same concept applies to personal finance. Due to this dynamic, starting at an early age allows for a greater potential return on your financial knowledge as you continually learn more with the passage of time.
If you know how your money works before spending it, you will make better decisions now and in the future. With enough of these improved decisions, you can begin to see results through practiced application. Sadly, in the current state, financial literacy for students has not become a priority for many schools across the country.
These basic money management skills could go a long way toward helping kids understand the burden of student loans, credit card debt, or other poor financial choices. In truth, we often only understand the value of a dollar after we need it or after we have spent it. What usually results is an inefficient resource allocation, or worse, drowning in a sea of debt.
To change this pattern of behavior, focusing on early financial literacy education would allow individuals to develop a healthy relationship with money. Further, they would learn the importance of earning, saving, and managing their money. In turn, this would lead to a society of financially-responsible people making better money decisions. Several financial apps for young adults help to build this financial literacy.
Armed with the appropriate information to make wise decisions, people can smartly decide how to pay for college, a vehicle, or even a mortgage on a home. They would also know the financial and mental burden of accumulating too much debt, making costly purchases beyond our means, and falling prey to high-interest predatory lenders.
In truth, you should not need to experience a financial misstep to benefit from it down the road. If we can start teaching financial responsibility to our children, they will grow up knowing sound financial skills and become adults knowing no other way than being financially responsible.
How to Become Financially Literate: Learn by Doing
One of the best ways to improve your financial literacy is to give yourself a reason to learn it. Want to learn about stocks? Buy some small stocks or fractions of more expensive stocks (the Robinhood app allows you to try fractional investing while Webull allows you to paper trade or simulate what would happen with buying and selling stocks without risking real money).
You’ll find reading about stocks significantly more interesting if you’ve invested in something. Either choose to paper trade on a platform like Webull or just start small and don’t invest more than you can afford to lose.
As for budgeting and debt, have you recently read about an effective method for debt management? Try it out and see if it works for you. If you’ve read endless financial literacy articles about budgeting, try making one for yourself. It might not be perfect on the first attempt, but you’ll definitely learn something in the process and can make adjustments later.
Everyone is affected by their finances and that means we should all make an effort to be financially literate. Whether you want to become the next Warren Buffett or just become more financially stable, you’ll need to start by learning basic financial terms and concepts. The sooner you work to improve your financial literacy, the sooner it’ll lead to financial gains and real wealth.
About the Site Author and Blog
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious.
I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to lay out our financial independence journey and connect with and help others who share the same goal.
Previously published on Youngandtheinvested.com.
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