How to Start Your Financial Literacy Journey Today

Rosemary Kasiobi Nwadike -

Table of Contents

  • What is Financial Literacy?
  • Why Financial Literacy Matters
  • What are the Basics of Financial Literacy?
  • Steps to Start Your Financial Literacy Journey Today
  • Financial Literacy Resources to Explore
  • Financial Literacy Quiz: Test Your Knowledge
  • To Recap
  • FAQs

Money affects every part of life, yet many people struggle to understand how to manage it properly. 

A 2023 study by the S&P Global Financial Literacy Survey found that only 33% of adults worldwide are financially literate. 

This means most people do not fully understand basic financial concepts like budgeting, saving, debt, and investing. 

Without this knowledge, it’s easy to fall into financial problems like overspending, bad debt, and poor saving habits. 

The good news is that financial literacy is a skill anyone can learn—no matter your age or income level. 

In this guide, we’ll break down the different ways through which you can start your financial literacy journey, so you can take control of your money and build a more secure future.

What is Financial Literacy?

Financial literacy is the ability to understand and manage money effectively. 

This means knowing how to budget, save, invest, and make smart financial decisions. 

Many people struggle with money because they lack basic financial knowledge. 

Financial literacy helps you control your money instead of your money controlling you. 

It involves understanding important concepts like interest rates, inflation, debt, and credit scores (if you live in a country with a credit system). 

For example, if you know how interest works, you can avoid paying high fees on loans and credit cards. 

If you understand inflation, you will know that the value of money decreases over time, so saving without investing might not be the best option. 

Financial literacy is also about knowing how to set financial goals, plan for emergencies, and avoid common money mistakes. 

Without it, people are more likely to fall into debt, struggle with unexpected expenses, and miss out on opportunities to grow their wealth. 

Why Financial Literacy Matters

Financial literacy is important because it:

1. Helps You Manage Money Better:

When you understand how money works, you can budget effectively, track expenses, and avoid unnecessary spending. The lack of financial literacy can cost you a lot. Learning how to manage money properly helps you keep more of what you earn.

2. Reduces Debt and Financial Stress:

Many people fall into debt because they don’t understand interest rates, loan terms, or credit management. Financial literacy education helps you make smart decisions relating to these and avoid any form of debt.

3. Prepares You for Emergencies:

Life is unpredictable, and unexpected expenses like medical bills or job loss can happen. Knowing how to save and create an emergency fund helps you stay financially secure during tough times.

4. Helps You Build Wealth:

Understanding how to invest in stocks, real estate, or retirement funds is crucial for long-term financial success. Without this knowledge, many people miss out on opportunities to grow their money.

5. Improves Retirement Planning:

Many people reach retirement age without enough savings. Learning about financial literacy from reliable resources can help you plan better for retirement, ensuring you have enough money to live comfortably.

6. Protects You from Financial Scams:

Scammers often target people who don’t understand money matters. Learning about financial risks and scams helps you protect your money from fraudsters.

7. Gives You Financial Confidence:

Financial literacy boosts your confidence in handling money, making big purchases, and planning for the future. This confidence leads to better money habits and less stress.

What are the Basics of Financial Literacy?

1. Budgeting: 

Budgeting is one of the most important aspects of financial literacy. It means tracking your income and expenses to ensure you are not spending more than you earn. 

A good budget helps you control your finances, avoid debt, and save for future goals. 

2. Saving: 

Saving is basically putting money aside for unexpected expenses, emergencies, or long-term goals. 

Experts recommend having at least three to six months’ worth of living expenses in an emergency fund. 

Without savings, people may rely on credit cards or loans in emergencies, leading to financial difficulties. 

Many financial literacy resources emphasise the importance of saving as the first step toward financial stability.

3. Investing: 

Investing is the process of putting money into financial assets like stocks, bonds, mutual funds, crypto, or real estate to grow wealth over time. 

Unlike saving, which protects money, investing helps increase its value. 

Historically, the stock market has provided an average return of 7-10% per year, making it an essential tool for long-term financial success. 

Understanding investment options is a key part of financial literacy education.

4. Debt Management: 

Debt management involves understanding how loans, credit cards, and interest rates work. For countries with credit systems, credit can be useful, but mismanaging it can lead to high-interest debt and financial problems.

Learning how to manage debt, make timely payments, and avoid unnecessary loans is a crucial part of financial literacy.

5. Understanding Credit Scores: 

A credit score is a number that represents your creditworthiness. It affects your ability to get loans, rent an apartment, or even secure a job in a country that operates a credit system. 

A good credit score (above 700) helps you get better loan terms, while a low score can lead to higher interest rates. 

Some financial literacy resources often provide tools to check and improve credit scores.

6. Retirement Planning: 

Many people delay retirement planning, but it is a critical part of financial literacy. 

Setting up retirement accounts early can help secure financial stability later in life. 

Studies show that people who start saving for retirement in their 20s need to save less each month than those who start in their 40s due to compound interest.

7. Insurance: 

Insurance helps protect you from unexpected financial losses. Health, auto, home, and life insurance policies are essential for financial security. 

Without insurance, an emergency can drain savings and create financial hardship. 

Understanding different types of insurance and choosing the right coverage is an important aspect of financial literacy education.

8. Tax Knowledge: 

Taxes affect everyone, yet many people do not fully understand how they work. 

Knowing how to file taxes, take advantage of deductions, and plan for tax payments can save money. 

Financial literacy includes understanding tax obligations to avoid penalties and maximise returns.

Steps to Start Your Financial Literacy Journey Today

1. Assess Your Current Financial Knowledge:

Start by testing what you already know. You can take the financial literacy quiz below to see where you stand. 

This helps you identify which areas you need to improve, such as budgeting, investing, or debt management.

2. Set Clear Financial Goals:

Decide what you want to achieve financially. 

Do you want to save more? Pay off debt? Invest? Having clear goals makes it easier to find the right financial literacy resources. 

3. Create a Simple Budget:

Budgeting is one of the most important aspects of financial literacy. 

A budget helps you track your income and expenses, so you don’t spend more than you earn. A simple rule is the 50/30/20 method:

  • 50% of your income for needs (rent, food, bills)
  • 30% for wants (entertainment, shopping)
  • 20% for savings and investments

4. Start Learning from Free and Trusted Resources:

There are many free financial literacy resources for adults. You can read books like Rich Dad Poor Dad by Robert Kiyosaki or The Psychology of Money by Morgan Housel. The Obiex blog also offers articles on money management, just like this one. You can also listen to podcasts on financial literacy like The Dave Ramsey Show or BiggerPockets Money Podcast.

5. Practice Smart Spending Habits:

Financial literacy isn’t just about learning—it’s about applying what you learn. 

Start by cutting unnecessary expenses and comparing prices before making purchases. 

Avoid impulse buying by using the 24-hour rule: wait a day before buying anything that isn’t essential.

6. Build an Emergency Fund:

An emergency fund is money set aside for unexpected situations like medical bills or car repairs. 

Experts recommend saving at least 3 to 6 months’ worth of living expenses. 

Even if you start with just ₦5,000 a week, it adds up over time.

7. Learn About Credit and Debt Management:

Many people struggle with debt because they don’t understand how credit works. 

A good credit score can help you get lower interest rates on loans. 

Pay your bills on time, keep your credit card balance low, and avoid unnecessary debt.

8. Explore Investing Basics:

Investing helps your money grow over time. Start by learning about stocks, bonds, and mutual funds. 

Find apps that make it easy for beginners to start investing with small amounts. 

Even investing ₦10,000 a month can make a big difference in the long run.

9. Keep Learning and Stay Consistent:

Financial literacy is a lifelong journey. The more you learn, the better your financial decisions will be. 

Join online communities, take financial courses, and stay updated on money trends. Remember, small steps today can lead to financial freedom in the future.

Financial Literacy Resources to Explore

1. Websites:

There are several reliable websites that provide free financial literacy education. These platforms offer articles, guides, and interactive tools to help you understand money management better.

  • Obiex Blog - The Obiex blog does not just educate you on your finances but also on investment decisions, including stocks and crypto.
  • Investopedia – This comprehensive website explains financial terms, investment strategies, and personal finance concepts in simple language.
  • NerdWallet – Provides comparisons of credit cards, loans, and banking products, along with money-saving tips and financial advice.

2. Mobile Apps:

Financial apps make managing money easier by offering budgeting, tracking, and investment features. Here are some of the best options:

  • Mint – A free budgeting app that tracks income, expenses, and bill payments, helping you manage money effortlessly.
  • YNAB (You Need a Budget) – A paid budgeting app that focuses on giving every dollar a job, helping users save and eliminate debt.
  • Acorns – An investment app that rounds up spare change from everyday purchases and invests it for you.

3. Books:

Reading books on financial literacy can give you a deeper understanding of how to manage money wisely. Some of the best books for financial literacy education include:

  • The Total Money Makeover by Dave Ramsey – A practical guide that teaches you how to save money, get out of debt, and build financial security.
  • Rich Dad Poor Dad by Robert Kiyosaki – Explains the difference between working for money and making money work for you through smart investing.
  • The Psychology of Money by Morgan Housel – Focuses on how emotions and habits influence financial decisions.

4. Podcasts on Financial Literacy:

Podcasts are a great way to learn about financial literacy while on the go. Some top-rated financial literacy podcasts include:

  • The Dave Ramsey Show – Offers straightforward advice on budgeting, saving, and getting out of debt.
  • Smart Passive Income – Helps listeners learn how to create multiple income streams and grow wealth.
  • The Smart Money Tribe Podcast – Hosted by Arese Ugwu, this podcast discusses practical financial advice tailored for Nigerians.

5. Financial Literacy Quizzes:

Taking financial literacy quizzes can help you assess your current knowledge and identify areas that need improvement. Some useful platforms offering free quizzes include:

  • National Financial Educators Council (NFEC) – Provides a free financial literacy quiz to test your understanding of key financial concepts.
  • FINRA Investor Education Foundation – Offers quizzes on investing and money management.

6. YouTube Channels:

For those who prefer video content, YouTube has many educational channels focused on financial literacy education. Some of the best ones include:

  • Graham Stephan – A personal finance expert who covers investing, saving, and real estate.
  • The Financial Diet – Focuses on budgeting, saving, and financial wellness for beginners.
  • The Smart Money Woman (Arese Ugwu) – Focuses on personal finance lessons tailored for Africans.

7. Government and Nonprofit Programs:

Some Nigerian organisations and government initiatives also offer financial education programs:

  • The Central Bank of Nigeria (CBN) Financial Literacy Programme – Educates Nigerians on budgeting, saving, and responsible borrowing.
  • Money Africa – A platform offering financial education courses and tips for Nigerians.
  • Smart Stewards – Provides financial coaching and workshops for adults looking to improve their money management skills.

Financial Literacy Quiz: Test Your Knowledge

Take the quiz below to find out how much financial literacy you have:

Question 1: What is the main purpose of creating a budget?

A) To track how much money you can spend

B) To help you save money and allocate resources efficiently

C) To figure out how much you owe in taxes

D) To limit your financial freedom

Question 2: Which of the following is NOT typically considered a fixed expense?

A) Rent or mortgage

B) Utilities

C) Car loan payment

D) Groceries

Question 3: True or False: A budget helps you prioritise spending and make informed financial decisions.

  • True
  • False

Question 4: How many months of living expenses should an emergency fund ideally cover?

A) 1-2 months

B) 3-6 months

C) 6-12 months

D) 12-18 months

Question 5: What is the most important benefit of having an emergency fund?

A) It allows for luxury purchases

B) It helps cover unexpected expenses without going into debt

C) It provides a means to invest more in the stock market

D) It earns high interest

Question 6: True or False: You should start saving for an emergency fund before paying off high-interest debt.

  • True
  • False

Question 7: Which of the following investment options is typically considered the safest?

A) Stocks

B) Bonds

C) Real estate

D) Cryptocurrencies

Question 8: What is the main goal of diversification in investing?

A) To invest only in one asset type for simplicity

B) To spread risk across multiple types of investments

C) To focus on short-term returns

D) To invest only in high-risk, high-reward assets

Question 9: True or False: The stock market is a guaranteed way to make money over the long term.

  • True
  • False

Question 10: What is considered "good debt"?

A) Credit card debt with high interest

B) Student loans for higher education

C) Payday loans

D) Debt for luxury items like vacations

Answer Key:

1. B

2. D

3. True

4. B

5. B

6. True

7. B

8. B

9. False

10. B

To Recap

  • Financial literacy is the ability to understand and manage money effectively, including budgeting, saving, investing, and making smart decisions.
  • Financial literacy helps you control money, avoid debt, and plan for emergencies, while also protecting against scams.
  • Financial literacy is important as it aids in better money management, reduces debt and stress, prepares you for emergencies, builds wealth, and improves retirement planning.
  • The basics of financial literacy include budgeting, saving, investing, debt management, understanding credit scores, retirement planning, insurance, and tax knowledge.
  • Retirement planning should begin early. Starting in your 20s leads to lower monthly savings needs due to compound interest.
  • Insurance provides protection from unexpected financial losses, making it an important part of financial planning.
  • Tax knowledge can help reduce financial stress by understanding deductions and filing properly.
  • To start the financial literacy journey, assess your knowledge, set goals, create a budget, learn from free resources, practice smart spending, build an emergency fund, and explore investing basics.
  • Websites like Obiex Blog, Investopedia, and NerdWallet offer valuable financial education resources.
  • Apps such as Mint and YNAB help with budgeting, while Acorns aids in investing.
  • Recommended books for financial literacy include "The Total Money Makeover" and "Rich Dad Poor Dad."
  • Podcasts like The Dave Ramsey Show and Smart Passive Income provide valuable financial advice.
  • YouTube channels such as Graham Stephan and The Smart Money Tribe focus on financial education.

FAQs

Q1. What is financial literacy?

Financial literacy is the ability to understand and manage money effectively, including budgeting, saving, investing, and handling debt.

Q2. Why is financial literacy important?

It helps individuals make smart financial decisions, avoid debt, build wealth, and prepare for emergencies.

Q3. How can I start improving my financial literacy?

Begin by tracking expenses, setting a budget, saving money, and learning about credit and investments.

Q4. Are there free financial literacy resources for adults?

Yes! Websites like the Obiex Blog, NerdWallet, and Investopedia, budgeting apps, and free online courses can help.

Q5. What are the three most important aspects of financial literacy?

Budgeting, saving and investing, and debt management.

Q6. How can I test my financial literacy skills?

Take online quizzes, read books, or listen to financial literacy podcasts.

Q7. What are some good books on financial literacy?

Some recommended books include Rich Dad Poor Dad by Robert Kiyosaki and The Total Money Makeover by Dave Ramsey.

Q8. What are some easy ways to save money?

Automate savings, cook at home instead of eating out, and use budgeting apps to track expenses.

Q9. How do I start investing with little money?

Use micro-investing apps like Acorns or start with low-cost index funds.

Q10. How does financial literacy impact my future?

It helps you achieve financial stability, avoid money problems, and secure a comfortable retirement.

Disclaimer: This article was written to provide guidance and understanding. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.