The financial decisions you make now can impact the rest of your life. That’s why it’s important to go into every transaction with as much knowledge as possible. Whether you’re opening a bank account or considering a loan for a major purchase, understanding the basics of financial literacy is a must. If you’ve heard this term before but aren’t sure exactly what it means, here’s a basic guide.

What It Means

Financial literacy refers to a person’s knowledge and skills that pertain to their ability to manage their own finances. It means that you can clearly understand the options and effects of each potential transaction, which allows you to make strong financial decisions. A variety of factors go into strong financial literacy, and many people see it as a constant opportunity for growth.

Why It’s Important

Understanding the basic financial concepts surrounding bank accounts, financing, and mortgages will help you make better financial decisions. For instance, if you’re not familiar with a concept like compounding interest, then you may not be able to tell whether one loan option is better than another. You may be swayed by a convincing salesperson or confused by numbers that lead to you paying more for a loan overall. Financial literacy means you can look at each option objectively and make the right choice for your own situation.

Tips for Financial Literacy

Many factors go into successful money management, but it generally starts with budgeting. If you can cut your spending to less than what you bring in each month, you can save the rest in an emergency account, so you don’t need to live paycheck-to-paycheck or rely on financing for everything. Paying off debt is also a smart decision since it allows you to avoid expensive interest payments. Once you have those elements covered, investing may be a worthy consideration for the rest of your earnings.

If you’re looking to increase your financial literacy and want a bank to partner with along your journey, contact Citizens Bank in Byhalia, MS. In business since 1919, the Member FDIC bank offers a wide array of financial services to customers throughout Olive Branch, Victoria, Barton, and Northern Mississippi. From online banking to consumer loans, the local bank is known for its helpful staff and dedication to customers. View a full list of their services online or reach out to the team at (662) 838-2146.