Though the basics of financial literacy may be easy to understand, they are still vitally important for everyone to know. Financial literacy is understanding financial concepts and making informed money decisions. It covers various topics, from budgeting and saving to investing and insurance.
While it is never too late to learn about personal finance, it is always best to start early. The sooner your community develops good money habits, the better off they will be in the long run.
Financial literacy in America
According to the Financial Literacy and Education Commission study, only one-third of Americans can answer at least four to five financial literacy questions on fundamental principles such as mortgages, interest rates, inflation, and risk.
The need for financial literacy education is especially apparent in low- and moderate-income communities. A study by the Financial Industry Regulatory Authority (FINRA) Foundation before the pandemic found that only 41 percent of adults in households earning less than $50,000 per year consider themselves financially literate. This number drops to 18 percent for those earning less than $30,000 annually.
This calls for a significant change and a fundamental understanding of financial concepts for the public.
Importance of financial literacy
Everyone needs to learn about financial literacy for a variety of reasons. Here are just a few:
1. Help you better manage your money
If you want to achieve financial security, it’s essential to learn how to budget and save. Having a good handle on your finances will help you make smart choices about spending and investing. It can also help you avoid making expensive mistakes. For example, if you stick to your budget, you’re less likely to overspend or take on too much debt. Sticking to a budget can help you through more than just a rainy day.
2. Prepare you for life events
Life is full of surprises, both good and bad. Financial literacy can help weather the storms by teaching you how to plan for unexpected expenses and make the most of your money. For example, if you lose your job, having a solid financial foundation will allow you to weather the storm and stay afloat until you find new employment.
3. Help you avoid debt
If you understand how to use credit responsibly, you will be less likely to get into debt or fall behind on your payments. This is important because debt can majorly impact your financial well-being. For one, you’ll pay more interest if you carry a monthly balance on your credit cards. You can also better gauge between needs and wants so you don’t end up maxing your cards.
4. Assist you to reach your financial goals
Everyone has different financial goals, whether saving for a down payment on a house, paying off student loans, or putting away money for retirement. Whatever your goals may be, financial literacy can help you achieve them. Suppose you want to save for a down payment on your first house. In that case, there are a lot of banks and other financial institutions that offer special accounts for this purpose.
Opening a savings account and regularly contributing to it is a great way to reach your goal. However, the ideal percentage for starting a savings account will vary depending on your goals and how much money you have to save. However, most financial experts recommend saving at least 10-20% of your income.
Financial literacy for the community
Teaching financial literacy in the community has several benefits. It can help individuals and families better manage their money and make informed financial decisions. It can also help businesses by creating a more financially literate workforce, and it can help the economy by promoting sustainable spending and investing. Here’s how you can start teaching financial literacy in your community:
1. Volunteer with local organizations
Several organizations offer financial literacy programs. These programs offer a variety of resources, such as classes, workshops, and online resources. Many organizations offer financial literacy programs. You can contact your local United Way, YMCA, or Chamber of Commerce to find out about opportunities in your area.
2. Host financial literacy events
One way to promote financial literacy in your community is to host events that focus on personal finance topics. These events can be anything from educational workshops to fun activities like budgeting games. For example, you could talk about budgeting, credit management, investing, or retirement planning.
3. Advocate for financial education in schools
One of the best ways to promote financial literacy is to advocate for financial education in schools. One way to promote financial literacy in your community is to host events that focus on personal finance topics. These events can be anything from educational workshops to fun activities like budgeting games. In 2021, only 50% of Americans could correctly answer the TIAA Institute-GFLEC Personal Finance Index questions. That’s why every community must start teaching the younger ones about personal finance, starting even as early as high school, financial literacy advocates say.
4) Write about financial literacy topics
If you’re a good writer, you can use your talents to promote financial literacy in your community. You can write articles, blog posts, or even books about personal finance topics. This is a great way to reach people who might not otherwise be interested in financial education. And it’s a great way to share your knowledge with the world.
The community must empower individuals and families to make sound financial decisions. By teaching financial literacy, everyone can build a more robust economy for every member of the community. Be the change you’re looking for. Start today and be on your way to making sound financial decisions for yourself and your community.