Financial literacy has been a hot topic of discussion since 2020. But what does it really mean? The term refers to knowledge and practiced skills in making informed decisions that are effective and efficient with all of our financial resources. But, how can we understand core aspects of financial literacy, without speaking the language of finance?
Financial literacy now has an extra step involved, being the ability to navigate digital platforms dedicated to serve as financial tools. Now, we must learn to use these digital platforms and be financially literate.
Let’s explore what this entails.
Digitalisation of Finance
The transition from brick-and-mortar bank branches to digital banking was accelerated by the pandemic, with companies facilitating the change using various features such as bots, or “robo advisors”.
Leaders of financial institutions and FinTech businesses create and develop platforms for people to use in order to participate in the digital economy. Yet, a study from G20-insights indicates there is a vast “gap in financial literacy education, especially in lower income families, who are less likely to adopt fintech services.”
Though “robo advisors” are always available to provide basic advice and consultation, there are consumers of all ages and backgrounds who struggle to understand what questions to ask, and how to ask them.
By learning the language of finance, we enable ourselves to ask the right questions, and most importantly, make informed decisions.
The Power of Language in Finance
Suppose you are “shopping” for a mortgage to move into a new home. You’ve seen some houses or apartments, you’ve selected your preferred one, and now you’re off to a bank to get a loan, or you’re applying for one online.
You speak with your banker, and they say something along the lines of “We have a great offer, a 30 year fixed-rate mortgage.” You might be thinking to yourself, “I’ll be paying for this home for the next 30 years? What does this mean?”
Well, a fixed-rate means that the loan will not fluctuate with interest rate changes.
If you do not know what that means, you could simply ask your banker, but that would take away from your ability to rely on yourself to make informed decisions.
The trick here is, understanding the language of finance. There are various terms that make finance seem confusing such as compound interest, bonds, stocks, and the list goes on.
QueensOfMoney is here to help demystify the language of finance, and enable you to navigate these platforms and technologies as a means of creating healthier money habits.
Before you make any financial moves:
· Learn financial lingo.
o You can Google the terms of words you do not know. We recommend Investopedia as it is reliable and vast in financial knowledge.
· With your budget and goals in mind, frame conversations to get answers to your questions.
· Now, you can make an informed decision on your next financial move.
Financial Literacy Month
We entered April, financial literacy month, with an initiative across our social media pages that focuses on the language of finance. We want to take the big words that you read and simplify them.
If we can understand how business leaders communicate, we can understand how they view the world. It is a matter of inclusion and participation, achieved by breaking down the language barrier.
Financial institutions and business leaders are not trying to trick us. Rather, it is up to us as individuals and as a community to educate ourselves and each other on the systems that make our world turn.
We encourage you to follow our social media pages where we share knowledge and tips in matters of financial literacy. Our interest in finance, compounded, will yield great results for us all!