How is your financial literacy

Money–GIVE ME MONEY. We know we need it and pursue it arduously, yet we never understand what it really is or how it works. Here is a short test to check your financial literacy. How many of the following questions or words that pertain to borrowing do you understand?

1. What does annual percentage rate (APR) mean? 2. Do you understand finance charges when you apply for a loan? Do you know how to ask what they are? 3. When you borrow money do you know if the lender is using an “simple” or “block” method of figuring your interest charges? 4. If you pay back a twelve month installment loan in six months, will you get back half the interest added to your loan? 5. When a lending institution states that your loan has a balloon payment clause, what does that mean? 6. Define chattel mortgage. 7. What does collateral mean? 8. Is it financially safe to be a co-maker or co-signer on someone else’s loan? 9. If you borrow $3,000 using a $10,000 TDC as collateral, will the entire $10,000 be tied up or do you still have money you can borrow on it? 11. Which pays more interest: a savings account or a Time Deposit certificate? Why? 12. What does “declining balance” mean on a loan? 13. What does “compound interest” mean? 14. What is a promissory note? 15. If a lender states that your interest rate is 2% above the prime rate, what does that mean?

The above is a sampling to test your financial literacy. My reason for bringing this subject to your attention is that unfortunately most of us are financial illiterates. We work very hard for every dollar but never take the time out to understand how to best utilize and maximize its use. We go to banks or other lending institutions and borrow without knowing how much the “renting of money” costs us WQ use credit cards recklessly only to wake up one morning realizing that we are deeply in debt. Than we beg for overtime hours or search for an extra job in the hope of paying off the debts. But the hole gets deeper.

Basically we are a nation of economic illiterates. Few of us have ever studied personal financing. Schools and colleges almost never teach students anything at all about our economic system in the classrooms.
And worse of all, most of us don’t care to learn how to handle money to maximize its utility. The saddest part of all is that many of our lawmakers are also loaded with misconceptions about financial issues on which they pass laws.

The heart of the matter is that both “pure” and consumer economics are horribly neglected fields in our personal lives and, sadly so, also in our public schools. As a result of our ignorance, most of us suffer financially and never realize why. We just seem to never have enough money.

We fail to realize that behind every social change, there is an economic cause. It’s simply impossible to understand the modern world and its trends without understanding the key part economic changes play in our lives and in our future.

It is time you begin your education about money and its use. A little knowledge will go a long way in stretching your dollar. Stop throwing away your hard earned money. Take the time and effort to become financially literate. If you don’t, the system will destroy you. You have to protect yourself and your money. As someone once said: A fool and his money are soon parted.