Financial planner, Jeff Rose, has a well-received video on the 7 Financial … Whenever we mention personal finance management, this statement typically wants to ask the financial management of a private or a family’s resources.It comprises of how you manage your money through expenditure, investments, and savings, considering various life events and risks. If you do not have a plan, you will overspend or incur unnecessary expenses. Naturally, personal finance serves a very important functional purpose for students as well. And it will not just principle money, you have to pay interest too. That is a common question that goes through the minds of individuals, especially recent graduates who have not experienced firsthand the consequences of financial illiteracy. Without personal finance, it possible to live a life of bondage without knowing how to get off debts or adequately pay for your bills. http://www.people.hbs.edu/scole/webfiles/cole-shastry-smarts%20HBS%20working%20paper.pdf, A statistically significant association was determined between negative financial habits, such as gambling among Australian youth, and the influence of peers and parents (Science Direct). http://ucanr.edu/sites/consumereconomics/files/136495.pdf, An additional year of schooling increases the probability of having an investment income by 4.4% for whites and 1.7% for blacks (Harvard Business School). Here I will be talking about a Few Reasons why personal finance is important. These are the common questions that go through the mind of an individual when he/she listen the words, “Personal Finance” “Personal Financial Management” “Personal Financial Planning” in a true sense all are same. High-interest debt causes you to pay more than the item’s cost. Why is Personal Finance Important? In 2020 around 44.7 million students have $1.56 trillion student loan debt. Our team is proud to be creating a new paradigm within higher education by bringing the topic of money out of the shadows. How Personal Financial Planning will help in achieving my financial goals? I love to know about your experience in, 8 Effective Ways to Improve Your Financial Literacy (6+ FAQs), How to Save Money: 8 Exact Steps to Save Money, 25 Finance Quotes to Manage Money Effectively, Side Hustle Ideas: How To Make Money In College, How to Open a Checking Account [Exact steps You Need To Take], Credit Card Or Debit Card: Which One Should You Choose, Going to College:7 Financial Tips for College Students. This is the ultimate reason why personal finance is important. You are a student, suddenly you develop some medical problems that need to be taken care of immediately. Financial literacy is an important aspect of life by the fact that all people use money. In order to increase the financial well-being of individuals within our communities, financial literacy is a necessity. They’re both important and schools are forgetting one of them.” – Robert Kiyosaki, founder of the Rich Dad Company, “Financial literacy is an issue that should command our attention because many Americans are not adequately organizing finances for their education, healthcare and retirement.” – Ron Lewis, former United States Representative, 58% of 18-26 year-olds set aside a portion of their income as savings (Bank of America). Why Business Finance Is Important Businesses run on money, and business finance guides you to make shrewd and prudent decisions about cash flow and longer-term funding strategies. “Finances inherently—whether or not it’s incredibly short-term in just buying lunch for that day or long-term saving for retirement—help you accomplish whatever your goals are. Budgeting, Spending, and Saving. By planning your finances, you manage your money such that you reach your life goals. Always remember one thing Debt borrows from your future income. Personal finance is a valuable tool which will help you to boost your finances. If you ever visit a financial planner, they are highly likely to begin your financial plan discussion by asking you what your financial goals are. This is where managing your money and personal finance comes in. http://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf. Instead of asking why financial education is important, perhaps we should be asking how to impart a strong personal finance education to every citizen to reap the full benefits of a financial education. Keep control over your spending habits. Still, some are not convinced of the benefits of teaching personal finance and repeat the question: why is personal finance important? Budgeting, Saving and Spending. But if the result is negative then you have to be more serious about your personal finances. In short, here’s WHY Personal Finance is important as well: Advanced Personal Finance likely leads to a higher net worth, less financial distress, and you can start experience life as desired instead of running from month to month paycheck! For that, you have to take your personal finance seriously. means you have more money going out than coming in. Professors and instructors thoroughly educate students on academic requirements and grading policies. For Building Wealth & Security. And that my friends, is why learning personal finance is so important. It does not matter how much do you earn If you spend more than you earn, you will ultimately be broke. The mean value of the savings scale rose from a mean of 24.28 to 26,78, which was deemed statistically significant. Increase Your Cash Flow. It’s often new financial responsibilities and realities that campuses are not adequately educating or preparing students for success. While good in intention, curriculum made by individuals without significant financial expertise will often glance over important detail and leave learners without much valuable knowledge. To answer the question, “Why is personal finance important”, many educators and policy makers are able to cite academic studies along with reports produced by financial education foundations. Debt encourages you to spend more than you can afford. Not all, but many of the financial goals people set for themselves involve accumulating more money than they currently have. Why is Personal Finance Important? When you increase the investment in assets your number of liabilities also increases. Why do you need to manage your money? Those pleasantly surprised at the myriad of benefits that arise from being financially literate must also keep in mind that such knowledge is much easier to acquire through a reputable education program than other means. Below are some key areas of finance that play an important role in … #3. As Edmond Mbiaka says “A lot of people spend so much time to look rich, they forget that the plan is to get rich. This shouldn’t be like, that daily routine which took 10 days to make but was not followed even for one week. To answer the question, “Why is personal finance important”, many educators and policy makers are able to cite academic studies along with reports produced by financial education foundations. Why is personal finance important? This is bad enough, but the issue goes far deeper. Copyright 2020 National Financial Educators Council |, Local & Virtual Financial Education Events, https://www.fdic.gov/consumers/consumer/moneysmart/pubs/ms070424.pdf, http://business.time.com/2013/01/17/todays-young-adults-will-never-pay-off-their-credit-card-debts/, personal finance should be required in high schools. Once the need for personal finance makes itself obvious, that usually equates to budgeting. As Adam Smith says “What can be added to the happiness of a man who is health, out of debt and has a clear conscience?”. Personal financial skills are important because without them, people usually spend their entire lives slaving for money, always in debt, never able to catch up and get ahead. Wants may change over time. The State Bank of Pakistan states that to help develop and disseminate content, it is important to partner with local and international entities and leverage their specialties (St. Benedict’s Preparatory School). If you are not paying now you have to pay in the future (with interest). When seeking financial freedom, personal finance plays a significant role. Should I have a credit card as a college student? After making a budget you need to follow it strictly. To maximize your returns you have to take action, you have to give yourself that specific knowledge. “Finances inherently—whether or not it’s incredibly short-term in just buying lunch for that day or long-term saving for retirement—help you accomplish whatever your goals are. In this article, I’m going to answer all those questions. Finance relies on accounting, but while accounting is mainly descriptive, finance is active, using accounting information to manifest tangible results. Why is personal finance important? Another most important financial concept is cash flow. But personal finance can reduce your paying time significantly. Unfortunately, most of us are not prepared to handle it. For example, saving for college or a vacation. There are a lot of branches in personal finance. Personal finance is a difficult topic to learn about and for that reason a person just naturally tends to shy away from it, making excuses in an attempt to avoid having to learn about it. When children watch their parents slaving for money, always owing more than they get from their hard work, the children usually repeat that behavior as adults. Here, we will discuss the influence of finance in our life. Firstly, it enables individuals to organize their assets allocation is in … Name any situation and it goes back to money. To understand why personal finance is so important, you have to first know what is personal finance. Do you know why personal finance is important? Want to get ahead in your finances, then at some time of your life you will need to invest. Why credit cards are important? Is it good to have a credit card? Personal finance courses usually cover topics such as investing, saving for retirement, and maintaining good credit. Well, personal finance is extremely important and here are some reasons why. Build a good credit or use a credit card wisely. Should I have a credit card as a college student? Cheak the trends of the last few years, their ups and downs in some specific season or check the dividend, terms and conditions. But to begin with, you need not hire a Personal Finance Expert or Financial Advisor to manage your money. Because you have to take that step and only you can manage your finances. Positive cash flow means you have more money coming in than going out. A lack of jobs contributes to riots and illegal activity. Because without it, generations of people will most likely continue to live unfulfilling lives as slaves to money.”. The future success of our students relies on providing opportunities for them to learn, develop, and strengthen core life skills they need today and more importantly tomorrow as successful graduates. Furthermore, statistically significant differences were noted for the proportion of kids who would compare price and buy on sale (University of California Division of Agriculture and Natural Resources). Which will help you to take serious loans like a house loan or car loan. Financial Education Can Improve Lifelong Financial Behavior But financial literacy will help you to keep them at minimum. Importance of Personal Financial Management. According to the economist, Student loans are “Good Loans” because it gives an opportunity to educate yourself. What is personal finance? You have to take it seriously if you want to make a profit from it. https://www.sciencedirect.com/science/article/pii/S0140197103000137?via%3Dihub, “Without financial literacy, divorce rates soar, families rupture, and women stay with abusive men for financial security. Invest in your knowledge, Do listen to the podcasts, Read blogs, Take the online courses, Take some offline courses. Budgeting one’s finances is one of the most effective ways of countering the impulsiveness of youth, primarily by not condemning it outright. Your goal should be to develop positive cash flow. Most obviously, understanding how to manage your own personal finance helps you to understand how to manage not only business finances, but … Would you take some loans or any other type of debt? There are many important lessons that one can learn from understanding of their personal financial statement.