Given the current economic situation, it seems that most households in the United States could benefit from learning about financial literacy. Most people are expected to figure out their own finances when they move out on their own, but lessons are lost in the muddle of life. Financial literacy is exchanged for the guess-and-check method of learning, which leads to huge money problems like unnecessary debt that could have been easily avoided.
Financial Literacy Will Help Avoid Predatory Lending
Many Americans are struggling with too much debt on a daily basis because of a lack of financial literacy. There is credit card debt, auto loan debt, payday lenders, and other high interest consumer debt that is dragging savings levels to nearly nothing.
Many homeowners signed loan documents with unsuitable loan terms and are trapped in unfavorable mortgages because they did not understand what they were agreeing to. This has caused many individuals to abandon their homes or lose them when the payments can’t be made. Financial literacy would have enabled these homeowners to fully comprehend the loan documents that they were signing. They may have been able to avoid mortgages they simply couldn’t afford.
Financial Literacy Enables Financial Knowledge to be Handed Down
Parents that are financially literate are able to pass this knowledge on to their kids. The best time to learn financial literacy is at an early age. Kids that can make smart financial decisions turn into adults that can prosper. They can avoid the debts traps that so many others fall into and live a life that is truly debt free. A financially literate parent is a great resource for a young child. Children have a tougher time understanding the financial world around them if they can’t learn good habits from their parents or other role models.
Financial Literacy is Planning For The Future
The key to financial success is to have a well thought out plan for your money. Financial planning is vital to the management of your finances. This involves keeping track of your expenses and your income. Financial literacy gives each person the power to construct a financial plan for their lives. This plan could be used to obtain a certain amount of money for retirement or to reduce debt levels and personal expenditures. It is impossible to have a bright financial future if you do not have an effective plan to get you there.
My Take on Financial Literacy
I had good role models growing up. My parents and grandparents were financially literate and taught me the ropes. I don’t think a child needs to know absolutely everything by a certain point, but it did seem obvious that the foundation I had allowed me to build on my financial knowledge quicker than the majority of my peers. I had a budget in college and knew to avoid loans if/when possible while many of my friends would borrow the maximum amount that they could to continue to live in the nice lifestyle they were accustomed to. By the time they graduated, they had racked up years and years of debt.
What is your take on financial literacy?