5 simple ways to boost your financial literacy – and why it matters

It’s entirely understandable that you may struggle to keep on top of your finances from time to time. 

With each new tax year comes the possibility of fresh rules and allowances to consider, while Budgets might introduce changes that affect your income, savings, and investments.

Read more: Why it’s so important to base your financial plan on the knowns, not the speculation

Even so, building your financial literacy, including the ability to apply beneficial financial concepts to your day-to-day life, is a vital step in taking control of your future.

Having a strong grasp of the basics allows you to make informed decisions, spot opportunities, and avoid costly mistakes. 

Yet many in the UK don’t believe in their ability to make sound financial decisions.

A 2024 survey from the Financial Conduct Authority found that 12% of UK adults – equivalent to 6.5 million people – have a low financial capability. 

Among these people, 92% reported negative emotions as a result.

The same research states that 70% of respondents believed receiving financial education at school would have helped them handle economic challenges later in life.

While you can’t change the education you received, you can take positive steps to improve your knowledge today. 

Continue reading to discover why financial literacy is so essential, as well as five ways to increase your confidence and put yourself in a stronger position to achieve your long-term goals.

Financial literacy might enable you to make more informed decisions

Financial literacy is more than simply knowing the difference between a pension and an Individual Savings Account (ISA).

Indeed, it’s about developing the knowledge and confidence you need to make decisions that suit your circumstances and goals. 

For instance, when you understand how compound growth works, you may start to see the benefits of saving or investing earlier. 

By the same token, when you know how tax rules might apply to your situation, you can start taking advantage of allowances or manage your wealth in a way that limits your tax liabilities. 

Financial literacy also helps you feel more in control. Rather than worrying about whether you’re doing the right thing, you can approach financial decisions with clarity. 

This is especially beneficial during periods of uncertainty, such as high inflation or market volatility. The confidence you have in your financial plan allows you to stay focused on the horizon, rather than stressing yourself out and reacting impulsively.

5 practical ways to improve your financial literacy

Of course, you don’t necessarily have to become an expert overnight to improve your financial literacy. 

Instead, you can start with small, practical steps that gradually build your knowledge and confidence. Read on to learn about five ways to do so.

1. Seek out more financial information

One of the more effective ways to improve your understanding of your wealth is simply to seek out more information from reliable sources.

This could mean reading guides, attending webinars, or following updates from trusted financial organisations.

However, it’s vital to be cautious of “noise”, especially regarding your investments. 

With so much information available online, it’s easy to become overwhelmed or distracted by predictions and opinions that don’t necessarily relate to your circumstances. 

To avoid confusion, focus on quality rather than quantity and rely on factual information rather than opinion.

2. Get more involved with your budget

Another practical step is to become more involved with your budget. By taking the time to regularly review your income and expenditure, you could gain a clearer picture of your overall financial position. 

You can identify areas where you might be overspending, find opportunities to save more, and ensure that your money is working hard to help you achieve your long-term goals.

Tracking your finances might also help you spot patterns and trends, giving you a unique insight into your habits and helping you make any adjustments where necessary.

3. Set yourself attainable goals

To further boost your financial literacy, it’s vital to set attainable goals. When you know exactly what you’re working towards, such as paying off any debts or saving for the next phase of your life, you can make better decisions about using your wealth.

It’s also wise to break larger objectives down into more manageable ones, as this can make them feel achievable and provide a sense of progress along the way. 

Don’t forget to reward yourself when you achieve any of these goals. Celebrating the wins, however small, can keep you feeling motivated as you understand the benefits of your hard work.

4. Have a conversation with your friends and family

Rather than attempting to figure everything out for yourself, it may be prudent to have an open conversation with your loved ones about your wealth. 

Doing so could allow you to view your finances from an entirely new perspective. There isn’t a “one-size-fits-all” approach to managing your wealth, and one of your friends might have an interesting yet effective way of budgeting.

Family and friends might also explain complex topics in simpler language rather than financial jargon, making it far easier to understand.

Just make sure you don’t experience fomo (fear of missing out). While your loved ones might help you boost your financial literacy, it’s important you don’t simply copy their financial plan. 

Their situation and goals are likely highly different from yours, and their savings targets might not necessarily help you achieve your long-term aspirations.

5. Seek professional help

Ultimately, seeking guidance from a financial planner can significantly improve your financial literacy. 

We could bring the expertise and experience needed to help you make sense of more complex topics, ranging from pensions to tax planning.

We can also answer any questions you may have and help you apply your knowledge to your own unique circumstances.

While it is vital to improve your own financial literacy, having a trusted partner by your side gives you reassurance that you’re on the right track and making informed decisions.

Email info@athertonyork.co.uk or call us on 0208 882 2979 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.