Financial Literacy: Why is it necessary and how to get started?

Money is a matter that follows us throughout our lives, from waking up to sleeping. Every day, we make decisions about spending, saving, or investing. How well do Thai people understand this? The problem is that schools don’t teach it, families don’t teach it, so each person learns through trial and error.

Financial literacy, which means “the skills and knowledge about finance,” is the ability to organize your money, make conscious financial decisions, and avoid falling into debt problems.

Why is Financial Literacy Important?

Imagine for a moment that you buy something unnecessary. According to Warren Buffett: “If you buy things you don’t need, soon you will have to sell things you do need.”

This is the problem. Without good money management, money meant for bills, emergency savings, or investments to grow your wealth gets spent on unnecessary purchases. Over time, financial stress begins.

People with good financial literacy have many advantages:

• They are not victims of debt problems because they know how to negotiate loan terms
• They are prepared for crises with savings
• They achieve life goals, such as buying a house, traveling abroad, or retiring comfortably
• They feel confident about life and are less stressed about money

5 Main Components of Financial Literacy

1. Budgeting (Budgeting)

This is fundamental. You need to know how much money comes in and where it goes, dividing it into:

• Essential expenses (rent, travel, groceries)
• Non-essential expenses (entertainment, gifts)
• Savings (for the future)
• Emergency fund

2. Saving (Saving)

If you don’t develop a habit of saving, it’s hard to build a nest egg. Think about it: if your salary is 18,000 THB, how much should you save? Around 10-20% of your income can be enough to build a reserve.

3. Investing (Investment)

Money saved but not invested will erode over time due to inflation. The understanding of financial literacy suggests that savings should be used to generate additional income, whether through stocks, bonds, mutual funds, or other investments.

4. Debt Management (Debt Management)

Everyone may have some debt, such as student loans, credit card debt, or mortgage. The key is to understand that late payments and high interest rates can turn into huge debt. Therefore, it’s essential to understand loan conditions clearly and pay on time.

5. Understanding Taxes and Choosing Financial Products (Financial Products)

Whether it’s a savings account, credit card, or digital assets, all have pros and cons. You need to understand which products suit your needs. When choosing, consider your financial goals and your risk tolerance.

True Benefits of Having Financial Literacy

Prevent serious mistakes: If you don’t understand the terms of a loan with floating interest rates, rising rates could leave you in trouble. Such issues often lead to long-term economic problems.

Be prepared for the unexpected: Unemployment, illness, expensive medical bills—when these hit, no one can predict. But if you have 3-6 months’ worth of living expenses in reserve, problems won’t escalate.

Achieve life goals: Want to buy a house? Retire early? Send your children to school? All require planning, not just luck. This skill helps you know how much to save and when.

Confidence in life: Knowing where your money goes, why it goes there, and how it can make your life better—this confidence will follow.

Real-life Example: Mani and Financial Literacy

Mani just graduated from university and got a job with a salary of 18,000 THB. Today, she decides to apply financial literacy in her life as follows:

First: Create a budget dividing income into rent 5,000 THB, utilities 1,500 THB, groceries 3,000 THB, transportation 1,000 THB, entertainment 1,500 THB, and save 6,000 THB (for savings and emergency fund)

Second: She opens a high-interest savings account to build her emergency fund. Once enough, she starts exploring investments in stocks or mutual funds.

Third: She realizes this is an ongoing learning process. She reads finance books, listens to podcasts, and attends workshops to better understand markets and trends.

After 2-3 years, Mani has a decent emergency fund. Although her job is somewhat risky, she’s not stressed because she knows she has savings.

Financial Literacy and Investing in Markets (such as stocks, crypto markets)

If you want to invest profitably, you need to understand the basics of the market:

• Learn how to buy and sell first: Stock or crypto markets can be volatile. You need to know where you stand if stocks go up 10% then down 10%. (Answer: You won’t be back to the same point)
• Set goals and plan to reduce risk: Don’t put all your money into one thing; diversify your investments.
• Follow news and information: Economy, policies, daily news—all impact prices.
• Learn risk management: Set stop-loss points clearly, not driven by emotion.

How to Develop Your Own Financial Literacy

( 1. Read books and search online

There are many websites, YouTube channels, and podcasts teaching finance from basic to advanced levels. The key is to find reliable, up-to-date sources.

) 2. Seek advice from professionals

Sometimes, the right way to use money isn’t obvious, or the financial landscape changes rapidly. Consulting a professional is okay.

3. Prepare for the unexpected

Everyone should have 3-6 months’ worth of living expenses in an easily accessible account.

4. Plan for retirement

It’s never too late. Start gradually saving, choose suitable retirement products, and calculate how much you need monthly after retirement.

5. Cut unnecessary expenses

If you want to save more, sometimes you need to prioritize essential purchases first, and postpone non-urgent ones to next month.

Summary: Why is Financial Literacy Necessary?

Financial literacy is an essential skill in today’s era. Whether you are an employee, a worker, or an entrepreneur, everyone needs money, makes decisions about money, and votes on how money is used.

When you have good financial literacy:

• Stress is halved
• Confidence in decision-making increases
• Life goals become more achievable

If you’re a beginner in investing, start with familiar markets like stocks or securities. Many tools help beginners understand easily, such as free demo accounts ###demo account### to practice before real trading.

In short: Start learning today for a safer tomorrow.