5 Scary Facts About Financial Literacy – And How To Avoid Becoming A Statistic Family finances
If you are reading this story, then you are already ahead of the curve.
This is because adults and adolescents in the United States – and around the world – are extremely ignorant when it comes to financial literacy. They struggle to understand basic concepts such as how interest works, the importance of inflation, and how to assess investment risks.
This ignorance is worrying, experts say. “There is a lot of money to be made from the bad [financial] decisions, ”says Billy Hensley, senior director of education at the National Endowment for Financial Education, a Denver-based foundation focused on improving financial literacy. “There are predators out there who want you to make bad financial choices so that their bottom line goes up. . “
Want to stand out when it comes to financial literacy? You should. Here are five stats about financial literacy … and how to avoid becoming so.
Fact: 35% of people with bad credit don’t research before applying for a credit card, according to US News Credit Card Survey. Credit cards offer fantastic rewards, but come with great risk. Use them wisely and you can improve your credit score and collect travel points, miles and cash back. Use them stupidly, however, and they can derail your finances, destroy your credit, and cost you thousands of dollars in interest and fees along the way.
Find the best credit card for you by doing your research using resources such as US News Credit Card Ranking. Make an effort to understand the financial movements that will help you build good credit. If you can’t take responsibility for a credit card, don’t use one.
Reality: 1 in 5 teenage students in the United States lack basic financial literacy skills, according to International Student Assessment Program, or PISA. Teens may be young, but it is important that they understand basic financial concepts. Teens face dozens of important financial decisions before they celebrate their 20th birthday. They will need to make wise choices when borrowing student loans, building credit from scratch, and choosing careers. “As 18 and 19 year olds, we ask them to make the second most important financial decision of their lives, after their mortgage,” says John Pelletier, director of the Center for Financial Literacy at Vermont’s Champlain College, of Choice to take out student loans.
Reality: In the United States, 29% of working women demonstrated basic financial literacy compared to 47% of working men, according to the Global Center of Excellence for Financial Literacy, or GFLEC. While women tend to be less financially educated than their male counterparts around the world, they tend to be more aware of their knowledge gaps, says Annamaria Lusardi, academic director of GFLEC at George Washington University’s School of Business in the United States. District of Columbia.
But educate women on their money is particularly critical because it creates ripples in their communities. “Women are important agents for financial literacy,” says Lusardi. “Because women tend to care [for] others around them, this knowledge can enrich not only themselves, which is important, but others around them. “
Reality: 54% of student loan holders did not attempt to determine their future monthly payments before taking out their loans, according to GFLEC. Borrowing for college is one of the first major financial decisions young people will make in their lives, experts say. And the way they manage their loans can determine whether they have a healthy financial life with good credit and strong savings, or a weak financial future, with crushing debt and lousy credit.
Students should research not only the amount of loans they are borrowing, but also the type of loan – federal, state, or private – and what their future payments with interest will look like. There are dozens of resources available to help map this, from US News’ pays for college go to the financial aid offices of their university or college.
Reality: Among adults who responded to a national survey, 20% were offered and participated in financial education, according to the FINRA report. Financial capacity in the United States 2016 report. This is what it means: “4 out of 5 [adults] that you meet every day … learn [financial literacy from] school of hard knocks, ”says Pelletier.
But school of hard knocks is usually not enough to educate people on essential financial concepts. “We don’t acquire financial literacy by just looking at the world around us,” Lusardi says. Some formal education is helpful in understanding personal finance. While taking a finance course is not a panacea for gaps in financial literacy, experts say it can be a start to understanding the basics of credit, borrowing, saving and lending. bank.
The bottom line: Outside of a major systemic change – for example, if Congress suddenly guaranteed some level of retirement security – financial literacy is essential for Americans who want to manage their money wisely.
There are many ways to learn and maintain your money skills. Finance students can choose to take courses in high school, college, or community colleges and local programs. Consider taking a free course on Smart about money, an initiative of NEFE, on everything from the financing of emergency plans to the budgeting of transport. Read blogs and articles published on US Personal Finance News section, and check out personal finance books from your local library.
Know where your limits lie. If you can’t understand a financial concept or need a professional eye, you can hire a financial advisor. But you will need to use your financial literacy skills to identify the one that meets your needs and acts in your best interest, commission free.