Importance of financial literacy in entrepreneurship

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Financial literacy is the ability to understand how money works i.e how money is made, managed, invested and spent. However, to understand how money works one needs to know some common financial literacy terms such as; financial goals, priority/order of importance and budgeting. As an entrepreneur, your budget should always be centered around your long and short term financial goals according to their order of importance.

Gaining mastery of one’s finances as an individual and as an entrepreneur is an important aspect of financial prosperity and building a successful business. An entrepreneur’s prudence in financial matters has to be top notch if the business is going to survive.

So, below are some reasons why financial education is an important aspect of entrepreneurship.


From times past and even up till now, money has always been a major problem for start-up companies. So for founders who have taken prudence as their watchword, doing business gets a little bit easier and less difficult. For every start-up business, every penny the company spends has to be on the best option available to influence the growth of the business.

When spending is properly thought out this way at the startup phase, it gives the business some stability and discourages playing to the gallery.

Track Growth

Financial literacy 2

Financial literacy also involves studying and analysing data and results. For instance, if a company pays for marketing or adverts, it should be able to track how much sales has come in through that channel.

This way, the business owners can know if it was money well spent in the event of a profit or money wrongly spent in the case of a loss.

Informs decision making

Like it was stated above, monitoring the outcome of what company money is spent on helps an entrepreneur(s) make better decisions going forward. Such that any profitable venture attracts more funding while the unprofitable ones are abandoned in order to keep the business afloat.

Attracts investors

When a company wants to expand and is in search of investors, one of the things they ask for is your financial records. How and on what causes have you spent money on so far? This will give them an inclination as to how they think their money will be spent, as no investor wants to give his/her money to financially profligate individuals masking themselves as entrepreneurs.


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