Financial Literacy

 Financial Literacy


Due to the recent economic state of the world, many people have turned to analyzing finances. The truth is that something as simple keeping a budget has proven to increase the chances of a person eventually reaching financial security. But what truly is financial literacy and what are some tips to reach financial security.

What is Financial Literacy?

The term financial literacy is defined as, "the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being." (2008 Annual Report to the President)

Skills take time to learn and master. Therefore, financial literacy involves more than simply memorizing information. It involves a "long term vision and planning for the future"(PBS). 

This includes basic information such as taxes, interest, loans, credit, budgets among many others. Financial literacy can range from very simple to very complex topics but if practiced constantly good results are likely. 

The Big Problem

So what is the problem? Many people, especially millennials have little to no knowledge of finances and how to manage them. The responsibility mainly falls on the parents however, very few themselves have any knowledge about finances. Only 24% of millennials are able to demonstrate basic financial understanding. This can can be very dangerous as millennials are essentially the future generation. If not even 1/4 are able to demonstrate basic financial understanding than things are looking very complicated for the future. Little financial knowledge leads to poor financial management, impulsive spending, credit card debt, bankruptcy, and in some cases even evictions. It may seem very overwhelming however some things can be done to improve the situation. 

What can be done
The main suggestion on how to improve financial literacy understanding is for it to be considered a core curriculum subject in schools. Although many schools do cover finances in their classes, very few actually dedicate a class to it. Some highs schools cover the subject during math class or economics however, little time is spent on it and many students study for the test but soon forget the information. By the time they reach college many are already thirty thousand dollars in debt and have no idea how to begin to pay it off. Many schools have caught up to this and are beginning programs to help their students understand about finances from a very young age. The hope is that by the time these kids reach college they are not only about to have a basic understanding of finances but have financial freedom. 

Resources
  • Some schools offer programs as part of their curriculums. Other dedicate a whole semester to these classes. The goal is to increase the knowledge of finances and achieve financial freedom.
  • People can reach out to local accountants and request financial advice. Many are willing to do this for free. 
  • Students can sign up for mentoring programs at school. Doing this allows them to really grasp the concept and not be afraid to ask equations.
  • Plenty of institutions offer free courses. The time frame is not very long and it is usually catered to the individual. 
  • Some programs offer night classes to parents looking to find ways to speak with their kids about finances. A lot of people blame the parents for poor money management of the kids when most parents don't know how to have conversations with their children's about finances. These programs inform the parents, teach them how to speak with their children's and offer help and support. 

My personal experience
Personally I agree with what most experts say regarding the importance of money management. I personally currently take a financial class in college. Although I took a class in highs school, I have covered many things that were not covered in high school. I believe it is incredibly important to learn to manage one's money and use it to the best of our abilities. It is true that money does not buy happiness however, financial security helps avoid many headaches. Currently, the U.S government said they would probably have to close due to having insufficient funds. Although it is true that this is the government fund, bad personal spending can lead to borrowing from financial companies, who borrow money from the government, who borrow money from other countries. Long story short, the better we are able to manage our money the more we would limit having to borrow money. If everyone does this it would mean a better economy as a country. Small changes have significant consequences. 

Works cited

Public Broadcasting Service. (n.d.). What is Financial Literacy - Your Life Your Money. PBS. Retrieved October 11, 2021, from https://www.pbs.org/your-life-your-money/more/what_is_financial_literacy.php.

 


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