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Financial Literacy Topics You Should Understand by Your Early 20’s

Financial Literacy Topics You Should Understand by Your Early 20’s

Financial Literacy Topics You Should Understand

There are a few things that you should know by the time you are 18 and if not 18 at least in your early 20’s when you enter the real world. These financial topics are:


  • The moment you start earning, you should start saving too. You should save a certain percentage of your salary every month. Make a 50/30/20, rule of thumb where you save 20% of your salary, spend 30% of it on your wants or desires, and 50% on your needs which includes your living expenses and essentials. If you follow this rule you will enjoy the pleasures of life and at the same time start building a corpus for the future.

  • Young people often think that they cannot save because their salary or income is less and their expenses are high. It’s true that initially when you start your career then the income is not much but being aware will always help you find ways to save a certain percentage of your income. Money is like the crop of a farmer where a minimum of 10% of the crop harvested this year becomes the basis of the crop for next year. If the farmer uses this 10% also to make a living this year, he will be a little better off no doubt, but then he won’t have anything to sow next year.

Using Credit Smartly:

People use credit all the time but only a few understand it properly. These days credit cards are one of the most notable forms of credit that many use but a good percentage of those who use them don’t understand how they work. The best way to use your credit card is to get the benefit of the free credit period that it offers but always pay the balance in full by the due date so that no interest is charged. Credit cards charge 1.5-2% on the outstanding balance every month which comes out to be a whopping 18-24%.

The best way to use your credit card is to make all payments on it for the entire month and just before the due date clear the credit card account. This benefits you in two ways: Your money in a bank account earns interest for the entire month and you earn reward points on your credit card purchases which can be redeemed further. This way you don’t pay any interest on the expenses made on the credit card and utilize the free credit period fully.

If you have to make any hefty purchase, then don’t use a credit card for it. Instead, go for a personal loan: remember personal loan you can avail of 11–12 % interest while a credit card charges you an interest rate of 18-24%. Also, remember not to take this loan for unnecessary things. Understand that debt and alcohol work in the same way. When used in moderation you get pleasure, enjoy it too much, you have problems, get addicted and you are in real trouble.

Be a Deal Hunter and a Smart Shopper:

  1. These days we keep having sales all year round on e-commerce websites like Flipkart, Amazon, etc.
  2. You often get good deals in these sales but you need to be a deal hunter and also a smart shopper.
  3. Once you have perfected the art of finding a good deal, you need to think about if you need that item, that’s what makes you a smart shopper.
  4. Don’t be an impulsive buyer but go for a deal only if you need an item.
  5. It’s better to have a shopping list ready so that you buy only those items that you require.

Protect Your Savings:

  • It’s very easy to get tempted to dip into your savings when you are running short of money.
  • There should be an emergency fund that is liquid money and can be accessed easily when required but the remaining savings should be invested into instruments that dissuade you to access it.
  • This way you will not only protect your savings but if invested in the right instruments you will also make your money multiply and grow at a good rate.

Having a grasp over these common topics by the time you turn adults will help you deal with your finances in a much better way. Your aim in life should be to make your money work for you soon and not the other way around.

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