Why is it important to have knowledge about Finance?

1. To avoid being in Financial Trap

“You can neither go any further, nor you can go back” You might end up being caught in the financial trap before you know it. Especially the “Debt” trap that once you get caught in, you can hardly get out of it. Some are trapped in that trap for the rest of their lives. Some can eventually get themselves out of the loop of debt. 

However, if we have knowledge about what good and bad debt is, how much to pay for a month or how to deal with it, we might not end up in the debt trap. Especially for the newly graduated students who have just earned their own money and spend it as they want to, they need to have financial knowledge to avoid getting caught in the financial trap.

2. The faster you know, the faster you became rich

“Time is gold” The time in the investment is also a gold because the more time you invest, the more profit you earn back in return. Not only the increasing profit, the risk seems to get low according to the period of time. You might have heard 30-40 year old investors say  that they would have been rich already if they knew about finance and investment at an early age. 

There are 3 factors in the investment that will make us gain a lot of profits

The first factor is investment money: As we know, the more principal, the more return of investment.

The second one is rate of return: It is a certain thing that the 0.25% interest rate per year from the savings account is less than the 8% of the interest rate per year from the investment.

We can do these two factors ourselves. If you have low investment money, do a part-time job or second job to make more money. If you want to have more return of investment, study more about investment to invest in assets with a higher rate of risk to make more return. 

3. Can take care of yourself & not being burden to family

If this idea is cultivated at an early age, It will discipline the use of money until retirement. If you graduated and have good financial management, you can live your life for the rest of the month without asking for more money from your parents. 

Nowadays the idea of “Having children to take care of them at old age” is not functionable. If you can have a good management of finance at an early age, you will have money to use at your retirement.

4. Can see your goal clearer

It is undeniable that every goal needs money. For example, your goal is to buy a house at this price, to have your dream car, to study abroad, to travel around the world, to have money to use in retirement. The more passion you have to achieve those goals, the clearer your financial plan is.

5. Deal with the financial problem properly

“Knowledge” is the first thing that makes us have a better decision. For example, the knowledge about paying that will make you think before spending. It includes knowledge about interest rate, the worth of the expenditure, or investment which the investor needs to study before investing. Instead of having a positive effect on investment, it turned out to be a problem . Some people have a lack of good planning, which can cause fear of investment.

6. Make your life easier than before

Inflation is one type of financial knowledge that we should know. It causes a 3% increase in goods’ price per year. Some kinds of goods and services’ prices increase by 5-8% per year such as fuel cost, education cost, and Medical expenses. On the other hand, the salary rate increases by 1-2% and it is not confirmed to raise the salary every month. 

30 years ago, the average starting salary for a bachelor’s degree was 7,000-8,000 baht. A bowl of noodles costs 15 baht which is equivalent to buying 50 bowls. At present, the starting salary for a bachelor’s degree is 12,000-15,000 baht. The price of noodles is 40-50 baht per bowl which is equivalent to buying 25-30 bowls.

There are not many choices for us. If you want to live a happy retirement life, we need to work more and have knowledge about investment and financial management to have more return on investment than the 0.25% interest rate from saving accounts. 

7. To form a good financial habits at an early age

The habit of not having money discipline cannot be fixed in a day or two. Likewise,  good money habits take time to build. It takes a lot of work to get things done in the first place, like spending or saving money, to get used to. The used-to-do habit will become our nature to do so automatically. Knowing the right financial position in the first place will be an important element in our early financial habits.

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