Financial literacy: Must-have skill for young entrepreneurs

IN today’s fast-paced and competitive business world, ideas alone are not enough to guarantee success. While innovation, creativity, and drive are crucial for entrepreneurship, one foundational skill often gets overlooked — financial literacy. For young entrepreneurs, especially those launching startups or venturing into business for the first time, understanding finance is not just helpful — it is absolutely essential.

- By CHANNA WANIGASINGHE

Financial literacy refers to the ability to understand and apply various financial skills effectively — including budgeting, saving, investing, and understanding financial statements. It encompasses everything from knowing how to manage cash flow, reading a balance sheet, and forecasting profit and loss, to making informed decisions about funding and taxes.

For an entrepreneur, financial literacy is the backbone of business sustainability and growth.

Why financial literacy matters for young entrepreneurs

1. Better decision-making

Young entrepreneurs often face key decisions like pricing their products, managing overheads, or choosing between financing options. A solid understanding of financial principles empowers them to make smarter, data-driven decisions rather than relying on instinct or guesswork.

2. Efficient cash flow management

One of the top reasons small businesses fail is poor cash flow management. Knowing when money is coming in and going out, and planning accordingly, helps entrepreneurs avoid shortfalls and stay solvent. Financially literate entrepreneurs are better equipped to plan for lean periods and scale effectively.

3. Access to funding