Financial literacy is the knowledge and ability to make wise decisions with your money. This may include spending, saving, budgeting, and investing. As well as, a plan for alleviating debt. It is important for business owners to be financially literate as it can aid in preventing common issues such as cash flow shortages, and understanding financial statements lets you know the profitability of your company and long-term sustainability.

There are various skills necessary for possessing a comprehensive understanding of your finances. Budgeting tools such as tracking income and expenses over a period of time and dispersing your funds to the needs and goals of your business is an excellent place to start in your financial literacy journey. Additionally, understanding how to plan for taxes as a business owner, and knowing how to prevent financial failure by learning how to read statements is the key to future success and financial growth.

5 Core Financial Literacy Skills

• Budgeting  – Create a plan for your income and expenses.
• Saving – Build security within your business by saving for short-term goals and by creating a safety net for financial mishaps. 
• Debt Management – Managing debt frees up cash flow that can be put into savings or investments. 
• Investing – Earn passive income and grow long-term wealth by investing.
• Protecting Assets – Protect your business, employees, and clientele from unforeseen disasters.

A survey conducted by The World Economic Forum found that nearly 50% of Americans lack financial literacy skills. This often occurs by way of simple mistakes such as a lack of budget, unnecessary spending, neglecting debt, and failure to invest.

Our government, as well as non-profit organizations, offer a variety of resources for financial literacy strategies. MyMoney.gov is a free resource offering a breadth of vital information regarding managing your finances. Many banks also offer financial literacy education for its members. Learn More

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