Financial literacy: adding up the benefits of starting young
It’s never too late to start your financial education, but the earlier, the better. From counting coins in kindergarten to planning for your retirement years, managing your finances is a critical part of your financial security — regardless of how much money you have.
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A 2015 National Capability Study published by the Financial Industry Regulatory Authority (FINRA), reported that two-thirds of Americans could not pass a financial literacy quiz that included basic questions about financial risk.
It also concluded that when age-appropriate personal finance topics, like budgeting, interest rates, and debt are incorporated into a school’s curriculum, it positively impacts the decisions, saving, and spending habits in adulthood.
Why is financial literacy important?
Financial literacy is important because it helps people become self-sufficient and achieve financial stability. This includes being able to save money, distinguish the difference between wants and needs, manage a budget, pay their bills, buy a home, pay for college, and plan for retirement. Literacy helps them create a realistic roadmap that will take them through their daily lives making good financial decisions.
Financial literacy also empowers people. With any lack of financial education, anything that resembles credit, interest rates, or investments is intimidating and leaves individuals at a disadvantage. We’re not saying you need to be a financial guru, but knowing how interest rates work, the difference between stocks and bonds, and the factors that impact your credit rating, for example, motivate consumers to ask questions and seek out their best options. It also decreases their stress level. When people are well versed in the state of their finances, they have the information they need to take action, modify their investment portfolio, or continue with their current strategy.
Understanding your finances helps reduce the risk of becoming a victim of fraud. Some tactics are easy to believe, especially when they’re coming from someone who seems to be knowledgeable and well intended. A basic level of financial education will help people recognize the red flags and, at the very least, talk with a trusted advisor before making any commitment.
Why is financial literacy important for students?
Financial literacy is important for students because it’s crucial to have a basic understanding of finances. With any educational plan, you’re continually building on the information you’ve learned in the past. It’s the same with your personal finances. You need to know how money works before you spend it, and that takes time and practiced application. Too many of us have learned the value of a dollar a little too late in life or what it means to be drowning in a sea of debt.
Early education allows individuals to develop a healthy relationship with money. They learn the importance of earning, saving, and managing their debt, which leads to becoming a financially responsible adult. They’ll have the knowledge it takes to wisely decide how they’ll pay for college, a car, or even a mortgage and know the consequences of debt accumulation, budget-busting purchases, and high-interest predatory lenders. You shouldn’t have to experience a financial misstep to benefit from it. Start teaching financial responsibility when kids can still be kids and when they’re grown-ups, they’ll know no other way.
Take the time to brush up on your financial literacy. At Georgia’s Own, we believe it’s our job to to help you make the right choices when it comes to your money—and we offer free, interactive videos to help you do just that. Click here to learn more and explore dozens of topics, so you can be confident in your finances.