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In the current economy, the notion of achieving financial literacy has never been more important. To put this into some form of context, the UK economy recently reported its largest fall since 1979, after declining by 2.2% since the beginning of 2020.
With this in mind, everyday households face a huge challenge in the bid to generate income and build wealth, especially with unemployment growing by 23% during the second quarter alone.
Financial literacy can help citizens to negate these challenges and become more financially secure. But what steps can be taken to actively achieve this?
1. Become Actively Interested in Finance and Money Management
Financial literacy is defined by Investopedia as "the ability to understand and effectively apply various financial skills", while it includes numerous elements such as financial management, budgeting and investing.
Make no mistake; understanding this is central to achieving a good standard of financial literacy, as it's impossible to become well-versed in or successfully practice a concept without detailed knowledge of its mechanics.
To build this foundation of knowledge, you'll need to take an active interest in finance and financial management, and fortunately the Internet is choc-full of resources that you can use to broaden your understanding.
There are plenty of in-depth but well written articles on sites such as Investopedia, for example, while podcasts and seminars can also serve as viable educational tools.
2. Use Demo Accounts and Trade Forex
While building a theoretical base of knowledge can prove crucial, there remains a significant gap between these and practical experience of money management, budgeting and investment.
However, there are technological tools that can help you to bridge this chasm, starting with so-called 'demo accounts'. These are featured on virtual trading platforms such as the MT4, and they enable you to access a simulated real-time market where you're able to grapple with the mechanics of fiscal markets without risking your hard earned capital.
In terms of learning the basics of money management and budgeting, there are also numerous apps that can help you on your ways.
Mint remains the standard bearer for money management apps on the current market, while the 'You Need a Budget' app is also ideal for those hoping to make their money go further.
3. Understand the Fundamentals of Budgeting
Budgeting is certainly a key aspect of financial management and literacy, although many people either underestimate its importance or fail to do this successfully.
In terms of best practice, you should note that budgeting only really works when you deal in accurate numbers, so be sure to deal in pence rather than pounds when listing your incomings, outgoings and precise level of disposable income.
When using your budget as a way of identifying and implementing cash savings, you should also focus on everyday items of expenditure rather than big-ticket purchases.
By minimising the recurring cost of utilities and groceries, you can make sustainable savings that accumulate over time and make an incremental difference to your financial security.
