The Need For Financial Literacy
Understanding Financial Literacy
Financial literacy. What does that mean to YOU? We wake up to the news with stock market news, but do we understand it? We open a 401k/IRA account and then receive statements, but do we know what kinds of interest rates we’re earning or fees we’re paying? How about we rewind it back to when we received our first paycheck (usually when we’re about 16 years old, with our first part time job) and we see all these deductions called taxes? Do we understand how that works? Then applying for our first credit card. FICO scores, building credit, credit reports. We do it because we’re told we need it, but don’t quite understand it.
Now mind you, I’m speaking for the vast majority. These questions may not apply specifically to you. I am speaking from experience of a banker who used to work for financial institutions. I spent years opening checking/savings accounts and submitting credit applications for clients. So the term financial literacy seemed far-fetched even for someone with a financial job background like myself.
The majority of Americans do not have the proper financial education and I believe it needs to start in schools as part of the curriculum. The SAFE Report also states the following: The latest National Financial Capability Study found that young adults answered fewer questions correctly about basic financial concepts than older cohorts. Only 30 percent of young adults (ages 18-34) rated their financial skills as “very strong.” The young people surveyed see the value of early financial education, with nearly 86 percent saying that financial education should be offered in school. Yet, only 36 percent of young adults surveyed have been offered financial education. Only 22 percent have received financial education. However, if the needs are great, so are the potential benefits both to the nation’s young people and to America as a whole. Furthermore, by helping young Americans to develop financial knowledge, skills and habits, we strengthen our nation’s families and communities. We open up opportunities and extend ladders of economic mobility. We help to build stronger families and a more vibrant, more prosperous economy.
You would be surprised by just how much personal finances classes can help make a difference in planning and managing your finances. It is puzzling, however, that basic personal finance management and planning is seldom taught at the high school level, just when young people are gearing up and preparing for life as an adult. Many young people and adults, also harbor the illusion that there is nothing fun to learn about personal finances. Yet money lessons can be fun. For example, figuring out which stocks to invest in and watching them rise or fall is always interesting. Learning what stocks are good to invest in teaches you to look forward to the future and think about how the market may change through a variety of unknown variables.
April has also been declared “Financial Literacy Month,” for numerous good reasons! However, I truly believe every month should be financial literacy as it is the core of everyone’s financial well-being. Everyone should seek financial education/workshops in their local areas. We all want to ensure our financial future for ourselves and our families to be set, right? Stay tuned as I give you the tools to help ensure a good financial future for you and your loved ones.