Despite improvements in banking technologies, many Americans are still unaware of how to manage their finances properly. In fact, only 48% of Americans were able to answer at least half of a set of financial literacy questions correctly. Even worse, less than 25% of millennials were able to answer basic financial wellness questions. So, how can adults best prepare younger generations to handle their personal finances properly and live successful lives? The answer begins with teaching financial education to young people both at home and in school. The following are just five of the reasons why teaching financial literacy is so important.
Learn how to save and budget
One of the biggest reasons why financial literacy should be taught is to best prepare them for saving and budgeting their money. Saving and budgeting are skills that are essential to being a financially successful adult and also require discipline that should be practiced from a young age. A strong financial education allows kids and teens to know where to spend and where to save their money, as well as how to create and stick with a budget.
Avoid harmful financial mistakes
Because financial education is often unfortunately overlooked today, many early adults have to learn about their finances the hard way. When kids and teens are not taught the impact of their financial decisions, it becomes easy for them to make mistakes such as not paying credit card bills on time or overdrawing their accounts. These financial mistakes can lead to long-standing disadvantages, such as having poor credit and affects financial stability and success. Encouraging financial literacy throughout one’s young life helps to prepare them to make the right financial decisions.
Understand the implications of college loans
With the increasing cost of college, many students are relying on loans to cover the cost of tuition for their higher education. However, when high school seniors agree to loans for an expensive college, they may be unaware of what they are signing up for. Students who are not financially literate may not understand how student loans work or what their other options are. Financial education taught through classes in school and by parents helps students to fully understand how their loans work, including how interest accrues and the dangers or defaulting on loans. This education will help students to be better prepared for repaying their loans as adults.
Helps boost the economy
You don’t need to look much further than the United States’ financial crisis during the early 2000s to see how the economy was damaged by those who didn’t understand the full implications of their financial decisions. Having a solid understanding of the impact that individual financial decisions make on the economy is a critical reason why financial literacy is so important. Those who are taught about finances as they grow up will be better prepared to make decisions that will promote a healthy economy. Financial literacy also provides the knowledge that individuals need to navigate finances during times of emergency.
Lastly, teaching young individuals about financial literacy goes hand in hand with teaching them about giving. By teaching the value of money, and how to spending wisely, it sets up more opportunities for young people to give back to those in need. After a strong financial education, they will be better suited to invest back into their communities.
As you can see, financial literacy is an essential skill that should be taught throughout one’s life, rather than only during adulthood. The month of April is both Credit Union Youth Month and Financial Literacy Month which seeks to promote the importance of financial literacy in young people. WMFCU is committed to building financial literacy in kids and teens, and that’s why we are offering a promotion on our youth accounts. From now until June 1st, open a youth account and you will be entered to win a bike or a $100 Amazon gift card! Visit our promotions page or stop by our office to learn more.