By Paulo Cabral on April 25th, 2025
Whether it’s out of fear of an economic crisis or to ensure a more comfortable retirement, knowing how to save is extremely important to combat economic uncertainties.
Saving is a valuable skill that can lead to financial security and peace of mind. Setting aside a portion of your salary and spending less than you earn are fundamental principles for building a solid financial future.
This is more than just a practice; it’s a lifestyle. Having a financial reserve is essential. The ability to save a portion of your salary not only provides a safety net, but also opens doors to achieving long-term dreams and goals.
But for many people, knowing how to handle money may not be an easy task. And that’s where studies on financial education come in. It’s a critical subject that deserves a place in school curriculums, as living outside the financial system is nearly impossible. The aim is to empower individuals with the knowledge, tools, and resources they need to make informed and confident financial decisions.
The importance of financial education
Financial education allows us to make choices that take into account what is truly important in our lives and the things we want to achieve soon. This is what leads us, for example, to walk past a store that is on sale without buying anything because we are saving money to take a course that will be good for our professional career.
Let’s take the example of buying a house, which is usually the most important financial decision of our lives. If you need to take out a mortgage, financial education will help you make the best decision regarding the amount, term and type of mortgage:
– Understand the impact of macroeconomic factors like inflation on interest rates and how these changes affect your mortgage and repayment capacity;
– Embrace responsible practices, such as seeking professional advice and comparing various options; and
– Exercise caution and prudence when navigating financial decisions.
These criteria will help you make better decisions in this case and in many others, contributing to your financial health.
Knowledge and Understanding
According to the Organisation for Economic Co-operation and Development – OECD, financial literacy is defined as “the knowledge and understanding of financial concepts and risks, as well as the skills and attitudes needed to apply them. Its objective is to make effective decisions in various financial contexts, improve the financial well-being of individuals and society, and promote participation in economic life.
Recent research conducted by the OECD reveals that, globally, only 33% of adults have adequate financial education. Levels of financial literacy are low even in developed countries, which continue to lack the notions required for their full development.
What to do to improve your knowledge about money
To gain better control over your finances, it’s essential to understand how money flows through your daily life. We work, earn, and spend—but how does it all truly come together? Taking practical steps can help clarify this cycle. Here are some tips to guide you:
- Track your monthly income to know exactly how much money you earn.
- Record all your expenses to get a clear picture of where your money goes and how much is spent each month.
- Identify your major expenses and explore opportunities to save.
- Determine a fixed amount you can set aside each month to build an emergency fund.
Sometimes, it’s difficult to recognize behaviors that may hinder your financial wellbeing. Watch out for key warning signs, such as:
- Spending your entire paycheck within days and struggling for the remainder of the month.
- Being unsure of exactly how much you earn or where your money goes each month.
- Picking and choosing which bills to pay while postponing others to the next month.
- Relying on family or friends for emergency financial support.
Developing good financial awareness begins with understanding your habits, behaviors, and limits, while pinpointing areas for improvement. Once you have a solid foundation, you can explore various financial tools and products to identify those that align with your needs, lifestyle, and stage in life.
If you’re striving for a more secure financial future, consider taking the following steps:
Start slowly: It is not necessary to set aside large amounts immediately. Starting with a small percentage of your salary and gradually increasing it can make a big difference over time. Consistency is key.
Live within your means: Though simple in concept, spending less than you earn can be challenging for many. Evaluate your spending habits, cut back on non-essentials, and prioritize needs over wants.
The 50/30/20 Rule: This approach recommends allocating 50% of your income for necessities, 30% for discretionary spending, and 20% for savings. This helps strike a balance between enjoying the present and planning for the future.
Build an emergency fund: A dedicated fund is essential for managing unexpected expenses, such as medical bills, car repairs, or job loss. It reduces reliance on loans or credit cards during emergencies.
Enable freedom of choice – Savings grant you the flexibility to make life-altering decisions, such as switching careers, starting a business, or traveling the world. Financial security gives you the confidence to seize opportunities.
Enjoy peace of mind – The true value of saving lies in the security it brings. A financial cushion provides the reassurance needed to navigate life’s uncertainties with confidence.
Beyond individual benefits, financial education fosters informed, socially responsible citizens. By understanding how personal financial decisions influence community well-being, individuals contribute to a healthier and more cooperative society.
As we have seen, knowing what to do with your money is essential so that you do not feel like you are groping in the dark when dealing with your money: it is the tool that will help you understand the different processes related to the world of finance, so that you can have more control over your life, make good choices and achieve your dreams. Having financial education means having more control over your life, making good choices and achieving your dreams.
Ultimately, having financial education is like holding a guiding light—it empowers you to navigate the world of money with clarity, control, and confidence. Whether it’s achieving your dreams or building a brighter future, the right financial tools can help you take charge of your life.