Today, TCO welcomes guest blogger Amy Young. Please enjoy Amy’s post and feel free to visit her website, linked at the bottom of the post.
Even those who are successful should be able to see that this country is going through a personal finance crisis. Many Americans don’t have the skills or resources necessary to make proper financial decisions. This problem has grown in recent years due to a lack of financial education among American citizens.
The Importance of Financial Literacy
If a person is financially literate, they are able to use credit responsibly. Through financial education, a person could become confidant in their ability to manage their money and financial risks, and they can understand the long term benefits of saving. This is all very important information to know if they want to be successful, but many do not have the opportunity to educate themselves about their personal finances and how to manage their money effectively.
Research shows that there is a connection between financial literacy and planning for retirement. The most financially literate are more likely to actually save and plan for retirement. Many people fail to determine how much money they will need to save before they retire, and they may not plan or save at all until they realize it may be too late.
Poor financial decisions could cause long-term negative effects, and a general lack of financial literacy could have national consequences. However, no single program or organization is going to fix this problem. It will take the effort of many to attempt national financial literacy.
First and foremost, this country needs to focus on educating children about personal finance and the importance of saving. As they grow up, children learn financial habits from their parents, guardians, and others who are closest to them. If these children aren’t learning the proper way to handle money initially, it will be more difficult for them to learn acceptable financial habits later in life, and they will then teach their own children poor financial habits.
In order to avoid this vicious cycle, schools should be required to provide financial education programs in classrooms at every age, kindergarten through high school. In these classes, instructors could teach saving habits, correct spending habits, and other important financial skills in a way that is age appropriate. These classes could bring up family discussion about budgeting and spending responsibly, and, in turn, could help improve financial literacy in the students’ homes.
Another way to break this cycle is to reach out to parents who most likely need financial education. If these parents see the wrong in their actions, they will be able to teach their children the right way to handle money, and they will give their children better financial advice in the future.
Taking a Step in the Right Direction
There are already many organizations all over the world taking the time to research ways to improve financial literacy and change poor financial behaviors. Some of this research has shown that combining financial literacy efforts with key life events (such as starting a new job or purchasing a home) is very effective. Various workplace programs have also been put into place to help employees increase their savings, which is particularly important with lower income families. However, access to these types of programs is very limited.
Financial literacy is now more important than ever before. In order to achieve economic growth in our future, this country must focus on ways to help those who need it most. Getting out of financial trouble can be very difficult, especially if there is a lack of financial knowledge in the home. If more people and organizations don’t take action to help educate these people, the future of this country could be dismal.
Amy Young is an author who works for a company attempting to create easily accessible resources for financial education. Her articles cover topics relating to business, marketing, and financial education.