25 April 2013

Financial Literacy should Start from Young

I strongly feel that financial literacy is a necessary skill for everyone. It's the kind of skill that you can never learn in school, most probably not even at home unless your parents are financially savvy and teaches you from young, or you have friends who can influence and guide you.

I think the best time to start learning is from young, it's like trying to catch a plane, if you miss it, you will have to pay more and then wait for the next one.

It's actually a very simple concept, Earn, Save and Invest.

Earn

You earn by being employed or self-employed. The key point is to have a steady stream of income. You will have to spend, but spend it on NEEDS and not too much WANTS, and that is under expenses, anything left after expenses are spare cash and that goes to Save.

Save

You set aside a small amount as emergency fund, if you don't ever need to use it, let it grow, but there should be a cap as there is no point holding onto too much cash. Anything after the emergency fund cap is for Invest.

Invest

Invest based on your risk appetite, don't invest in something because others are doing it or someone is saying you should do it. Do your own research, learn from it and invest when you feel confident. If you are not sure, don't do anything. Better to hold on to your money than to throw it away on a reckless bet.

As you can see, it's not wordy, the points are very simple, but I think there is room for refinement. If I knew this when I was 10 years old, my life would have been so much different.

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