Closely tied to business financial literacy is financial literacy in your personal life, but they aren’t the same thing.
They are both base upon the same principles, however they each require a different set of knowledge, a different base set of skills that constitute literacy, and business financial literacy builds upon the basics of financial literacy in your personal life, so you have to start there.
So what are the basics that you need to have under your belt in order to have the required knowledge to make sound financial decisions in your life?
Financial literacy is commonly defined in terms of people making sound financial decisions and managing their money well, but if you look more closely at that definition it is based upon the outcomes and results that people will have if they are literate, rather than the specific skills and knowledge that people need to acquire in order to make those sound decisions.
A Canadian non-profit GetSmarterAboutMoney.ca has an article here on the subject. In it they say:
The most common definition of financial literacy is the ability to make appropriate decisions in managing their personal finances. But when you look at this definition closely, you see that it speaks more to the results or outcomes of financial choices. It does not tell us which knowledge areas or competencies make a person able to make those good choices.
Other definitions seem to equate financial literacy with investor literacy. It’s about how well you understand the stock market, bonds and other investments.
I agree and think it would look more at what lies beneath those decisions. If we were to take a further look at that definition and try to come up with a more complete definition of the basic knowledge required in order to become financially literate, what are those basic set of skills that you need to understand? Here is what GetSmarterAboutMoney.ca have come up with.
Financial literacy is the set of skills and knowledge that allow you to understand:
The financial principles you need to know to make informed financial decisions, and
The financial products that impact your financial well-being.
Once you have gained those basic skills in your personal life, then you will be financially literate and ready to tackle the additional knowledge and skills in order to achieve business financial literacy.
If you don’t have the basics down, you will never be ready for the business skills you have to master and then decisions you have to make as a business owner.
How is your financial education? Do you have any skills lacking?
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Have A Prosperous Day!