Financial literacy isn’t just about understanding numbers — it’s about building confidence, planning for the future, and improving financial wellbeing. With the rising living costs, interest rates, and overall economic uncertainty in 2025, financial literacy is more important than ever. Understanding money can help you budget, save, and avoid falling into debt, reducing the impact that finances can have on your mental health.
What financial literacy really means
Being financially literate doesn’t mean being a maths expert. It’s simply about understanding how money works and the basics of earning, saving, borrowing, spending, and investing, so you can make informed financial decisions.
Day-to-day, being financially literate can help you to:
- Live within your means
- Manage credit wisely and avoid debt traps
- Set and achieve goals, both personal and business (e.g., buying a house, growing a side hustle, etc.)
Many of us were not taught financial literacy in school — financial education only became a statutory requirement in secondary schools in 2014. However, it’s never too late to improve your financial knowledge.
Financial habits that build stability
If you’re eager to enhance your financial literacy, whether it’s to take control of your spending or feel more secure, it’s never too late. Below are some simple and practical steps that can help you develop financial skills.
Create a monthly budget and track spending
A monthly budget can help you see exactly what money is coming in and going out, and track any unexpected costs. You don’t need fancy tools to create a monthly budget — you can simply list your incomings and outgoings in a notebook or a spreadsheet.
A huge benefit of budgeting is spotting spending patterns — do you know how much you spend a month on clothes or subscription services? Monitoring these costs can help you cut back and save more.
Build a small emergency fund
Life is unpredictable, and having an emergency fund can make a real difference to your overall financial health. Without this financial cushion, unexpected costs can set you back, making you more susceptible to debt.
Start by putting small amounts away — saving just £10 a week adds up to over £500 in a year! It’s a good idea to create a separate savings account for this purpose and set up a direct debit to top up the fund automatically each week or month. This fund will soon build up, covering you when those inevitable costly surprises arise.
Understanding ‘good’ and ‘bad’ debt
Not all debt is bad. Student loans, mortgages and business investments are all types of good debt as they build long-term value and can improve your future financially.
Bad debt includes borrowing money that costs you more than it’s worth (e.g., high-interest credit cards and payday loans), and that lacks long-term financial benefits. Financing items like designer clothes, new cars, or expensive gadgets is another example, as they often rapidly lose value and don’t generate income.
Although credit cards can be an example of bad debt, they’re not inherently bad. If used responsibly, by paying off the balance on time, they can actually help improve your credit score. Similarly, borrowing money to pay for an appreciative asset or to generate a passive income — such as a mortgage or business loan — can be considered good debt.
Understanding good and bad debt can help you make smarter decisions and avoid a cycle of borrowing more and more just to keep up with repayments. Ask yourself, “Will this decision help or hinder my future?”
Reframing your mindset: from stress to strength
Finances spiralling out of control can trigger guilt, shame, anxiety, low self-worth and even depression — money and mental health are deeply connected.
The shame around financial struggles can lead to avoidance, resulting in ignoring bills, putting off decisions, and not checking bank accounts — all of which can worsen your financial health.
The simple habits mentioned above can help relieve stress, provide the confidence to make better decisions, and improve your wellbeing long term.
Ultimately, financial literacy isn’t about being an expert or having all the answers — it’s about taking small steps that can often lead to a big change. You can take action today by starting a budget sheet, opening a savings account, or having a chat with a financial advisor for expert advice — setting small goals can help you feel motivated. Whether you’re simply wanting to improve your financial literacy skills or have a specific goal in mind, Shackleton Advisers can support you through every step of your financial literacy journey.
By Shackleton Advisers
Shackleton Advisers is a fully independent and Chartered financial advice firm, inspired by the values of legendary explorer Ernest Shackleton — respect, fairness, care, dependability, and courage. With a commitment to making financial advice more accessible across the UK, the firm takes a holistic approach to long-term financial planning, always starting with the individual’s needs. All advisers are directly employed and prioritise clients’ best interests above all else, reflecting Shackleton Advisers’ dedication to the highest professional standards and ethical practices.
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