Is your Organization Financially Literate?
By Krystal Rennie / Adlumin, Inc.
April is Financial Literacy Month, and now more than ever, it is crucial to be financially educated for both our economy and your well-being. A fundamental truth about financial literacy is that money does not equal instant success; it is the freedom to do what you will with money that breeds success.
Companies especially have a big responsibility to be financially literate and manage money correctly, as their customers’ safety and assets are at stake. Did you know that 29% of small businesses fail because they run out of capital? (Fundera). Luckily for your organization, there are practices, tips, and policies that can be implemented to ensure that your business prioritizes financial literacy to better the consumers and markets you serve. With that being said, are you interested in discovering how to achieve financial literacy successfully? Well, let’s jump right in.
What is Financial Literacy, and Why is it Important?
According to Investopedia, Financial literacy can be defined as “the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. The lack of these skills is called financial illiteracy.” On both a personal and business level, financial literacy is the key to financial freedom. This is an essential concept because financial literacy supplies us with the knowledge and skills needed to manage money effectively. It also guides decision-making processes and promotes informed judgments and effective policies.
Pillars of Financial Literacy
Now that you have a better understanding of what it means to be financially literate, it’s time to iron out a few steps to achieve and promote your organization’s financial literacy posture.
Below are various pillars of financial literacy:
- Budgeting: Creating and maintaining a healthy budget is a great way to stay on top of your finances. As an organization, planning out how yearly or monthly resources will be allocated saves you more time, effort, and money in the long run. When you effectively budget, you are establishing healthy spending patterns and eliminating excessive/unnecessary spending.
- Investing: This is a powerful pillar because it can bring long-term success to a company if investing is adequately done. Suppose your organization is going to be a good investor or investment for others. In that case, you must understand the different levels of corporate assets and how to differentiate between good vs. bad investments.
- Cybersecurity: It’s vital to protect your finances; it goes right along with the importance of protecting sensitive information, networks, and data. Consequently, you should invest in a third-party security and compliance automation platform to provide your network with 24/7 monitoring, detection, and alerts of malicious behavior. Sensitive documents and passwords must be secure to prevent identity theft, data breaches, and other cyber threats. A good cybersecurity platform is your insurance policy in the case of an emergency.
- Educational Programs: Achieving financial literacy starts with education. You should look into creating or investing in educational programs that teach the necessary steps, tips, and processes to follow when aiming for financial freedom. These programs would be a great way to equip your employees, customers, and community with everything they need to be a positive asset to your organization.
- Goal Setting: Whether it’s long-term or short-term, you must set realistic, timely, and measurable financial goals for your teams and organization as a whole. This will ensure that you are keeping track of funds and will highlight how close you are to meeting your goals and, evidently, financial literacy.
What’s the Key Takeaway?
The goal of financial literacy is to develop a more robust understanding of the financial concepts that will allow your organization to increase and maintain its financial posture. If your company’s end goal is to have longevity, you must be dedicated to providing your organization with the best choices, opportunities, and knowledge possible.
The journey to financial literacy is not a straight path. It often has many twists and turns. It is a long-term commitment built upon a foundation of knowledge and risk-taking. Before asking yourself if your organization is financially winning, ask yourself if your organization is financially literate? The answer you come up with will give you all the clarity you need to plan your journey to success.