Financial literacy. What does that mean to you? For some, it means knowing how to balance a budget. For others, it’s about being able to decipher the hieroglyphics that is your monthly pension statement. The common theme is about feeling in control of your money.
According to the Money and Pensions Service, around 24 million UK adults lack confidence in managing their money. With inflation and interest rates in the news daily, having a solid foundation of financial knowledge is crucial.
In my view, the approach should be akin to learning how to cook or drive a car. We didn’t start out cooking the perfect soufflé or doing an amazing parallel park. But, like any skill, it can be understood step by step.
The basics are simple. There’s budgeting, saving, and honesty. Be realistic with what’s coming in and going out. What are your essentials? How much do you want to set aside each month? What’s left over for fun? When purchasing a big-ticket item, consider the cost per use. What’s its lifetime value?
Tools like Monzo, Starling, or Emma make it easy to categorise spending and set up “pots” or “spaces” for your goals. It’s easy to automate the payments. Approach it as paying your future self.
Once you’ve got some breathing room, it’s time to think about debt and credit. These can be a double-edged sword. On the one hand, buy-now, pay-later can be helpful in the short term. In the long term, the high interest rates and resulting stress can be debilitating. In the UK, the average credit card interest rate is now over 24% APR. If you are struggling, charities such as StepChange and Citizens Advice offer free, non-judgemental help.
Then there’s investing. It’s frequently considered a man’s game. But that’s changing everyday. Today there are apps such as Moneybox, Wealthify, and Nutmeg, all of which help with getting started with investing.
It’s also a good idea to read the Financial Times to boost your knowledge. Even signing up to get the daily headlines delivered to your inbox is a great start.
Retirement planning also needs to be part of the conversation, even if it feels far off. In the UK, automatic enrolment means most employees are already paying into a workplace pension, with their employer contributing too.
But those minimum contributions might not be enough. Use tools like the PensionBee calculator to see how much you’re on track to get. Does it align with the lifestyle you envision?
Finally, adjust your mindset towards financial literacy. Think of it as a tool for freedom, rather than intimidation. Choose when you take a career break, or do those home improvements. Maybe that new bike shed can wait a few months!
At the end of the day, no one cares more about your money than you do. So learn about finance and let it stop being a scary gremlin. You decide what you want your money to do. Take that workshop. Track your spending. Over time, you’ll feel confident instead of fearful and your finances should benefit in the long run.
By Jordan Cracknell
Jordan Cracknell is a UK-based financier and author. Find out more at https://jordancracknell.com/ Instagram – https://www.instagram.com/msjordancracknell/
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