Fundamentals of Financial Literacy

Financial literacy refers to the fundamental knowledge needed to understand matters related to money. This allows us to learn how to manage money, where to invest, and how to save. Here are some important concepts of basic financial literacy.

1. What is Money?

Money is a medium of exchange we use to buy and sell goods and services. For example, we can use money to buy food, pay for transportation, or purchase school supplies.

2. Income and Expenses

• Income: This is the money we earn from work or receive as allowance. For example, an allowance from parents or money earned from a part-time job is income.
• Expenses: This refers to how we use our money. For example, buying lunch or giving a gift to a friend is an expense.

3. Savings

Savings refers to setting aside a portion of our earnings without using it. Through savings, we can prepare for future needs. For example, we can save money for a trip.

4. Budget

A budget is a plan for the money we earn and spend in a month. Creating a budget allows us to determine in advance how much money we will spend and on what, preventing waste and enabling better money management. For example, planning how to use your allowance is budgeting.

5. Investment

Investment is a way to put money somewhere to earn more money. For example, buying stocks or depositing money in a bank is considered investment. Investments can increase your money, but poor investments can also result in losses.

6. Debt

Debt refers to borrowing money from others. When you are in debt, you must repay the money later, and you may also have to pay interest on the borrowed amount. For example, borrowing money from a friend and having to repay it later is debt.