Teaching children from a young age about financial fundamentals is the first step. Financial education is one of the keys to economic success for any individual.
In 2019, the U.S. Financial Literacy and Education Commission recommended that colleges require financial literacy courses as part of their curriculum, and as of 2021, 25 states have introduced bills requiring personal finance education for high schoolers.
By taking action to increase financial education at home and in our communities, we are supporting the closure of the financial-education gap, which also affects our economy on a more general level.
Having a sense of financial literacy at a young age, or having an adult who can help, might enable a student to make good choices and keep them from going into significant debt at a young age.
Student loan debt
This is a big one. Too many students (or their parents) go into college not fully cognizant of the weight that student loan debt will place on them after college. Understanding the consequences of taking on a significant amount of debt of any kind is critical to not graduating “in the hole” and then having a career that does not realistically get you out of that debt until you are in your 30s.
If you are paying down student loan debt for more than a decade, combined with the lack of income you could be saving and investing, the losses are considerable.
Credit card debt
The lure of plastic and “unlimited” spending power at a young age is like the call of the Sirens. And like the Sirens, this kind of spending could put a young adult on the rocks with crushing financial problems if they do not understand the dangers of accruing debt with significant interest.
I have seen young professionals paying off credit card debt from college. (And not at student loan rates.)
And let’s not forget the millennials and other adults who now realize they don’t know what they want to know – or need to know – about their own financial fitness.
Fortunately, there are great online resources to help with this, including https://handsonbanking.org/ (in English and Spanish) and programs supported by the National Endowment for Financial Education, among many others.
Financial literacy is important. Not just during Financial Literacy Month, which was in April, but during every month of the year.
Much like learning to read, financial literacy affects each of us because of the ripple effect it has on our economy and the growing financial divide. And most critical, a lack of financial literacy also directly affects the success and potential of another generation of children and their families.
