I’m going to let you in on a little secret, many people don’t know a lot about budgeting, saving, credit and investing. Are you surprised? Probably not if you’ve had any recent conversations about money with your peers.
According to the NFCC Annual Financial Literacy Survey, sixty-one percent of U.S. adults admit to not having a budget and forty-one percent gave themselves low or failing grades based on their knowledge of personal finance.
My first thought after reading a statistic like this is; if money issues are causing people this much trouble shouldn’t financial literacy be taught somewhere – I don’t know…like in schools?
Uh, YEAH – but unfortunately in most cases, it is not.
Take my experience for example. While I didn’t graduate high school learning how to balance my checkbook or budget, I could solve for ‘x’ in an algebraic equation and spout off a few Shakespearean quotes on demand. You know, the important stuff.
As much as I’d love to place the blame on our education system for failing to adequately prepare students for life after term papers and standardized testing, it would be irresponsible at best.
The reality is, our financial success (or failure) is our problem alone! Forgive me for stating the obvious, but there’s a reason it’s called personal finance.
So how bad is the problem? Well if financial literacy statistics are any indication, things are not looking good and show few signs of improving. According to a test determining the Financial IQ of over 8,000 participants, the average financial literacy score among all age groups was 62.42.
Now I could be wrong, but I doubt scoring 62 on anything (outside of a football game) is a good thing. Ever.
So what about you? Do you have a budget in place? Can you adequately explain how credit scoring works? What about your retirement accounts? Are you on track to comfortably retire or does the whole thing just send you into a state of paralysis?
While we may be a long way from having financial education classes as required curriculum in public schools, there is still wealth of information available – if you really want to find it.
Here are a few tips to help you improve your knowledge around money:
- Determine your financial literacy deficit: There’s no shame in admitting what you don’t know. Begin increasing your knowledge base by acknowledging your financial gaps and working toward becoming proficient one step at a time. Whatever fundamental knowledge you lack, there is resource that can help get you on track – you just have to look.
- Understand that it is a process: As is the case with learning anything new, it is a process to go from learning a concept to application and mastery. We are conditioned to expect immediate results but it rarely works out that way. Remember that improving your financial literacy requires small, incremental changes in the short-term, that will eventually result in a major shift in your financial future.
- Continue educating yourself: Once you’ve established positive habits and achieved some traction financially, it might be easy to think that you can shift everything into cruise control and just enjoy the ride.
- Don’t! You should never stop learning. Life has a way of throwing you curveballs but by continuing to educate yourself, you will be less burdened by any challenges that come your way.
Don’t let lack of knowledge hinder you from managing your money to the best of your abilities. Start small and utilize the three tips above. Before you know it, you will have boosted your financial literacy and paved the way for a stronger financial legacy to your heirs as well.