If you name 10 things you do every day, I’d bet that at least nine of them would directly (or indirectly) involve money. Understanding how money works is critical to everyday life and it’s one of the major reasons why many states are finally reviewing its high school graduation requirements in relation to how much personal finance is taught.
Currently, it’s estimated that only 1 in 6 graduating high school students have any kind of personal finance class before graduation. This leaves millions of young adults completely unprepared to face important financial decisions, manage a basic budget and lacking an understanding of interest rates, taxes or investing. According to the Financial Industry Regulatory Authority, 63% of Americans are categorized as “financially illiterate”.
Simply put, the definition of “Financial Literacy” is the education and understanding of knowing how to earn, save, spend and invest money, as well as, the skills and ability to use financial resources to make decisions. Seems pretty cut and dry, right? Well, for one reason or another, the number shows Americans are failing…
- The U.S. ranks 14th globally in terms of financial literacy
- With a 57% literacy, the U.S. beats Botswana (52%) but gets edged out by countries like Germany (66%) or Canada (68%)
- Only 16.4% of U.S. students are required to take a personal finance class in schools
- 76% of millennials lack basic financial knowledge
- Four of five adults say they were never given the opportunity to learn about personal finance
- 22% of millennials feel overwhelmed about their finances
- 13% of millennials feel scared
Out of 1,500 U.S. adults surveyed last year, respondents said that, on average, they lost $1,230 dollars in 2018 by not properly understanding basic household finance issues – that’s about the monthly mortgage on a modest home. Almost 20% said that not understanding their finances cost them $2,500, and altogether, a lack of financial literacy cost Americans a total of $295 billion in 2018.
April as “Financial Literacy Month”, created to “raise public awareness about the importance of financial education in the United States and the serious consequences that may be associated with a lack of understanding about personal finances”, however, this message isn’t making it down to where it matters most – schools.
There is no question that everyone loses if there is a lack of education surrounding money management and other financial decisions. Bankruptcies, college loan debt, and credit card debt are examples of money issues that could be reduced with a better education. So, if you’re a parent who often stresses about money each month, here’s a closer look at financial literacy and what it should mean to you.
How To Learn More About Finance
1. Read Up
We know that it’s not the most exciting reading, but a few minutes each week in a popular financial book or magazine can do wonders. Start with Personal Finance for Dummies.
2. Go Back To School
While your kids probably aren’t learning about finance in school, you can take an online or in-person finance course that covers topics like accounting or retirement planning.
3. Listen In Your Car
Tuning in to a finance and/or investment radio shows or podcasts while driving in your car can help you pick up tips or hear how others deal with issues similar to yours. These shows offer real-world personal financial scenarios that anyone can relate to.
4. Watch Financial TV
You won’t find much of this on local stations, so tune into CNBC, MSNBC or another news station to hear from experts who can help you understand money and saving and investing better.
5. Talking To A Professional
Set up a time to speak with a financial planner or a tax expert to get the facts in person. This is a great way to get personal advice at a pace more comfortable for you.
Signs That You May Need Help
You may already be aware of a problem exists, but just in case, here are some signs that you need some assistance with financial matters:
1. Trouble Budgeting
In order to make ends meet, it’s extremely important to have a household or personal budget. No one can manage money just by looking at the balance of a bank account. It takes discipline to build and sustain a budget, but it’s perhaps the most critical step an individual can take to shore up his or her finances. Not having one, or having one and not sticking to it, is a sign that you need to get educated about money and savings.
2. Heavy In Debt
If you have that monthly feeling that your bills have taken over your life and you’re unsure how to make ends meet, debt is a huge factor in your life. If you are really deep in debt it’s time to do whatever it takes to correct the problem. See a financial advisor for help before turning to consolidation loans or other “quick-fix” options.
3. No Rainy Day Funds
While it’s recommended that you should have 3-6 months of money socked away in a rainy-day fund, most American’s have less than $1000 saved at all. A financial cushion can help you and your family get through an illness, a severe injury, a job loss, or other calamities. Not having one leaves you vulnerable to an unfortunate event that leaves you short of cash to cover the mortgage or rent and put groceries on the table, among other household financial needs.
4. What Is Compound Interest?
Do you know what compound interest is? If not, you could be missing out on one of the best ways to build strong savings. Do yourself a favor and look it up right now!