What Does It Mean to Be Financially Literate?

What Does It Mean to Be Financially Literate?

6 second take: It’s never too late to start becoming financially literate. All it takes is a decision.

We all make financial decisions every day. We just don’t necessarily think of them as such. What and where we eat are financial decisions. How we dress, what we drive (even if we drive), where we live — are financial decisions that we have made and continue to make.

Certainly, many of these decisions are more than strictly financial — there are other important factors beyond economic ones. But whether or not we’re conscious of the financial ramifications of these decisions, they still exist.

More than 53 percent of Americans feel anxious about their personal finances, with those under the age of 35 feeling the most financial anxiety as reported by the Financial Industry Regulatory Authority.

Luckily, there are numerous resources available to help you make better financial decisions and increase your financial literacy.

What Does It Mean to Be Financially Literate?

What’s the difference between financially literate people and those who aren’t?
Financially literate people generally consider the monetary ramifications of their decisions. Financially illiterate people generally don’t. What that doesn’t say may be as important as what it does say:

  • It does not say that financially literate people have vast stores of financial knowledge, wisdom, or experience.

  • It does not say that financially literate people spend an inordinate amount of time on small decisions.

  • It does not say that financially literate people always make the best decisions.

  • It does not say that financially literate people live frugally.

How Can We Make Better Financial Decisions?

Here’s the rub: People with lots of financial knowledge and experience can still make bad financial decisions. No one is immune.

About 77 percent of Americans rated themselves as being able to correctly handle daily financial tasks (managing credit cards, checking accounts), as reported by the Financial Industry Regulatory Authority.

Of this group, almost one-third have costly credit card habits (paying late or using the card for a cash advance), 21 percent borrow money from non-banks, and 13 percent often spend more than what is in their checking account, according to the same source.

Failing to think of a decision’s monetary consequences only increases the likelihood of a bad choice. So what do we do?

“Financial literacy is being able to understand all of the financial elements that concern you,” states Ethan Taub, CEO of Goalry. “While you can learn about stocks and investments, if you are just not there yet, it is better to focus on the basics for now and gradually work yourself up to more complex matters.”

The National Endowment for Financial Education’s Smart About Money program teaches you the basics. Meanwhile, the Financial Literacy & Education Commission’s MyMoney.gov website uses five building blocks: earn, save and invest, protect, spend, and borrow.

CentSai Education’s learning management system (LMS) is a great resource for teachers to help their students become more financially literate. Courses such as Financial Investing and Using Credit follow the Council for Economic Education standards and benchmarks for financial literacy.

Essentially, this LMS gives teachers a ready-to-teach curriculum for their students without confusing jargon.

All of these programs start with the essentials. There’s really no reason to understand markets or derivatives if you can’t budget and save money. It’s not glamorous, but it’s the reality.

Becoming Financially Literate: Where to Start

By making financial decisions every day, even the least financially literate people already know something. We all have a base of successes and mistakes. The beauty of this is that your financial education can begin from wherever you are.

“So often financial literacy is discussed from the standpoint of long-term goals, such as retirement or paying down credit card debt over a number of years. While these are great goals, they lack the immediate impact that can make a difference in someone’s financial life today,” states Justin Pogue, founder and CEO of Rental Secrets.

“Initially focusing on learning the financial knowledge to decrease real everyday expenses, like rent, can generate those immediate wins that empower people, change their mindset, and propel their continued interest in financial literacy for years to come,” adds Pouge.

Perhaps you have a lot of experience making informed financial decisions, but need some help with tax concepts or retirement planning. Great — start there.

Or maybe you have little experience in considering the financial aspects of your decisions and need help right from the beginning. That’s good, too. You can also start there.

No matter where you stand, it really comes down to one thing: To become financially literate, you simply have to decide to want to learn how to better manage your money. Decide to master your finances rather than letting your finances master you.

Then — from wherever you are — consider the monetary ramifications of the decisions you make. Use websites like CentSai and MyMoney.gov to help on your journey to financial literacy.

So start today with a baby step.

Write down one aspect of money you would like to learn more about. If you are starting at the beginning, that might be budgeting.

Another important concept is understanding your relationship with money. This often influences whether we have an abundance or scarcity mindset when it comes to personal finance, and it’s up to us to make a change.



To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.

2. The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning FinWise Bank is the FDIC Consumer Response Center, 1100 Walnut Street, Box #11, Kansas City, MO 64106. The federal agency that administers compliance with this law concerning Coastal Community Bank and Midland States Bank is the Federal Reserve Consumer Help Center, P.O. Box 1200, Minneapolis, MN 55480. The federal agency that administers compliance with this law for LendingPoint is the Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.

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