April was established as Financial Literacy Month for Youth by the US Senate in 2003. The following year, the Senate expanded the theme, making April Financial Literacy Month for everyone. The purpose of the month is to highlight the importance of financial literacy as the basis for maintaining healthy financial habits that will bring you to financial peace of mind. As with any area of life, lack of knowledge brings unnecessary problems.
Financial Literacy is not a given
The Center for Financial Literacy at Champlain College in Vermont released a study at the end of March, 2017 titled, “The 2016 National Report Card on Adult Financial Literacy.” Its findings were pretty disturbing. The bottom line is that a high majority of Americans lack financial knowledge and skills, leaving them ill-equipped to make the right decisions about their money and financial life. Poor decisions around spending, debt, saving and investing means that your path to financial freedom is going to be very difficult. The study looked at these core elements of financial literacy: saving and spending, credit, investing, retirement preparedness, and insurance.
Life is filled with very important financial decisions that must be made every day. At the same time, the financial products on the market today have become much more accessible, varied and complex. Many mistakes are made simply because consumers do not understand all the aspects of the very tools they use, such as credit cards, mortgages, insurance products, credit scores, and debt management. The most common misunderstandings and lack of knowledge are regarding interest rates and fees charged by banks and credit card companies, interest on loans and the impact of bill paying habits on credit scores. Consumers also demonstrate poor financial literacy in the areas of investments and savings, particularly retirement savings.
Financial Illiteracy Costs Trillions
Poor financial literacy can cost you thousands of hard-earned dollars and bring you unnecessary grief and heartache. CardTrack.com found that over the course of a lifetime, the lack of financial knowledge costs Americans in excess of $2.3 trillion dollars. On average, respondents estimated that their lack of financial knowledge cost them more than $9,000, but as the report suggests, this number is probably less than actual, because along with a lack of financial knowledge comes poor money management and tracking skills, meaning that you may not even know how much money you are losing. Think of the money you may have lost because you did not read carefully or fully understand how interest would be charged on your credit card. Probably if you read all the information and understood the various potential scenarios, you might have decided not to apply for that particular card, or you would be more careful about how you use it.
Take Advantage of This Month to Boost Your Financial Literacy
Now that we are in Financial Literacy Month, you will find many articles, videos, Podcasts and discussion groups to help you become financially literate. You can find them online easily by searching for “financial literacy month.” For instance, Money Management International created a 30-step program that you can take at your own pace to help you get on the road to financial literacy. Chief among the steps are:
- Assess your financial condition (don’t run from the piles, know who you owe, how much, how much is it costing you)
- Check your credit scores and correcting any errors
- Identify all sources of income and establishing net worth
- Set financial goals and strategies for achievement
- Separate needs from wants
- Commit to understanding the cost of credit (interest rate or APR, finance charges, length of loan, minimum payment, grace period, late fees, what happens when you go over your credit limit)
The 30-step program is filled with articles, worksheets, self-assessments and excellent practical guidance to help you not only achieve financial literacy but to build a strong foundation of financial empowerment that will last you a lifetime.
The Council for Economic Education is running a series of video presentations—“My Savings Story”—from a wide roster of entrepreneurs, authors, fashion designers and journalists focused on inspiring kids and young people to take control of their financial destiny. They are releasing the videos each week on their Facebook page, and while the videos were created for a young audience, the messages are for all of us. Their personal journey to understanding the importance of saving, limiting debt, and developing responsible spending habits is something to inspire even adults.
Financial literacy is financial empowerment. With financial empowerment, you are in charge of your life, free to pursue your life’s goals no matter what they may be.
