The month of April is designated Financial Literacy Month, and with financial wellness in the limelight, one thing is apparent: Americans remain in the dark when it comes to financial education.
The past decade we have seen investment being made in both the corporate and educational environments, with the aim of educating people about good habits including internet and data safety, and the management of mental health.
However, little is being said about the place that financial literacy has in school curriculums, success retirement planning, the management of unnecessary spending and investments, and even in the workplace.
Learning good financial habits and the reasoning behind them is now one of the best tools people can be equipped with from childhood, and it is one lesson that you can continually reap the benefits from.
Financial Obligations Are Starting From A Young Age
It is said that children learn monetary habits from the age of 7, which makes it the prime time to instill basic financial lessons. Multiple studies have also shown positive results of those that were taught financial literacy in their childhood: they grow up to be happier, healthier and more confident adults.
Therefore by instilling these lessons in their childhood, you are in turn improving the quality of their adult life. Given the increasing need for its presence, having financial education as a part of the school curriculum is becoming more called for.
Almost 69 percent of students are heading off to college with student loans, college graduates are leaving with over $30,000 in student loan debts and 48 percent of those under 25 are now holders of credit cards.
While parents play a large part in this education, the inclusion of personal finance courses or monetary based lessons in maths courses offered in elementary and high school can go a long way in building a solid foundation.
Financial Literacy May Rectify The Saving And Debt Dilemma Households Are Now Facing
As it stands right now, America is facing a crisis in both the retirement and savings department. In February 2019, consumer debt hit the $4 trillion mark, and households carried an average of $50,210 in debt for the fourth quarter of 2018.
Debt delinquency rates continue to rise slowly on loans, including car payments and student loans. While credit card delinquency rates are declining, balances are not, and the pressure is being felt on household income, although this rose by 3.7 percent between 2017 and 2018.
In addition, saving rates are low, with households having an average of $8,863 in their bank accounts, including in two-income households.
A staggering amount of consumers are also unprepared for emergencies, and ill-equipped to pay for those occurrences.
All of these adds up to one important skill: money management. Skills such as budgeting and the right management of debt (including interest rates) can significantly help individuals account for their income and make conscious decisions when entering into debt agreements.
Being financially literate means not just knowing about your financial options, but being familiar with the terms attached and how best to use them.
Business Entrepreneurship Rates Are Rising – And So Is The Need For Financial Literacy
More people are taking the leap and beginning their own businesses. As business owners or even managers, you face many different and sometimes significant decisions.
In fact, financing is one of the pillars of any business.
Therefore, it is crucial that entrepreneurs are equipped with the right financial knowledge to ensure the success of their business.
Being financially literate means they are able to understand what is going on, and maintain a strong grasp of certain concepts such as cost of capital. It also means they are able to locate institutions and financial services available locally and suitable for their specific needs.
In the end, this equates to better and more informed decisions. The impact is felt by the workforce as well. Almost 60 percent of Americans are not offered financial education in school or by their employers.
There continues to be a lack of financial literacy workshops and resources at work, and in turn, it continues to be a major source of financial stress amongst workers.
Being Prepared For Retirement Entails Being Armed With Good Financial Habits
Northwestern Mutual’s 2018 Planning and Progress Study showed just how unprepared people are for life after retiring. In it, 21 percent of people had nothing saved, and another 33 percent had less than $5,000 saved. Retirement planning is not done overnight.
It is something that requires commitment over time and a well thought out financial plan. Yet the majority of people do not know how to begin preparing for their retirement or the importance of a financial plan overall.
Research from Charles Schwab showed that only 20 percent of people have written plans, and more importantly, they think that tools such as financial and retirement plans are more suited for people with high measures of wealth.
This, however, is untrue.
A financial plan is suited to everyone on the wealth scale, and more importantly, the focus of such a plan should be on the benefit it brings instead of wealth tiers.
By following a plan, you can exhibit better money behaviors, including the tendency to pay bills on time, provide for emergencies and plan for the future by securing life and health insurance. Without this, you are left vulnerable to the debt spiral.
There is no question financial education has its place in our lives.
Based on the continuous benefits it provides throughout important stages in people’s lives, it should be made a priority. It is a key part of the answer to financial security, retirement success, and even stable business startups.