As the American (and global) economy remains in a constant state of flux, it’s becoming clear that the only way to avoid a recession in our own lives is to become financially literate – now. The economy is a constant roller coaster influenced by chains of events that we often have little control over. Which means the only thing we can control is the way we handle our own finances and prepare for the best and worst case scenarios. That’s where financial literacy comes in.
The Importance of Financial Literacy
According to a recent Harris Interactive Survey discussed on CNN Money, “nearly a third of U.S. adults admit their lack of knowledge has led to poor financial decisions”. That’s a startling number that shows how little today’s adult generations were prepared to understand finances and how it impacted their lives and, ultimately, our economy.
What could poor financial decisions include? Poor financial decisions could imply lack of savings for emergencies, lack of retirement savings, and taking on debt to fund your life. Why does that impact the economy? The repercussions of these decisions lead to desperation when times get tough. And when the majority of a population is struggling financially, so too will the entire economic structure as people default on loans, cut down on retail purchases, and end up sandwiched between older and younger generations that they need to take care of – leaving them no room to improve their own lives.
Fact: The economy is and always will be a roller coaster. There’s simply nothing that can be done about it except for empowering yourself to thrive on the upswing and survive the downswing.
Fact: The best way to minimize the curve of an economic downswing is to provide future generations with the tools and knowledge they need to stay on financially solid ground. Not everyone has to become an economist, but the better the health of an individual’s finances, the better the health of the collective economy.
The bright side: By starting the work to spread financial literacy now, younger generations can learn the importance of saving early on – both for emergencies and for their retirement. They can also learn the dangers of credit cards and taking on too much student loan debt. While this doesn’t guarantee that every single person will make good financial decisions thereafter, it does at least give them the tools they need to succeed.
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What Financial Literacy Can Do For You Now
If you’re in the midst of your own economic turmoil, you may be wondering how financial literacy could possibly help you at this point. You should know that it’s never too late to turn around even the most difficult of financial situations! Here are a few resources to get you started:
- Learn about creating a budget.
- Learn about starting an emergency fund.
- Learn about saving for retirement.
- Learn about how to get out of debt.
- Learn about how to approach student loan repayment.
- Learn about how your credit score works.
By educating yourself on better budgeting for example, you could suddenly learn tactics to free up room in your finances for debt payoff and funding a savings account. And learning ways to pay debt off faster that you may have not known about otherwise, you could also realize your dreams of debt freedom much sooner than you ever expected.
Find your favorite financial blogs and news sites and sign up for daily emails to expand your toolset of financial knowledge. Talk to your friends and family. The longer financial conversations remain taboo, the harder it will be to spread financial literacy. You might find that people in your life are struggling as well and you can both share knowledge and support each other on your journey to financial freedom.
How You Can Help Others Obtain Financial Literacy
Are you knowledgeable about financial topics and basic personal finance building blocks? If so you, have an opportunity to give back. What’s the best way to spread financial literacy to up and coming generations? Teach the skills in school. High schoolers should learn important basics like balancing a budget, understanding how APR and minimum payments work, and discovering the power of compound interest for long term saving. No, teenagers might not find this to be the most exciting topic. But it should be a part of the curriculum to increase exposure and interest. This will arm them with the knowledge they need as they approach adulthood and the subsequent credit card offers and – if going to college – financial aid confusion.
Then look at ways to spread financial literacy in your community! Perhaps you can talk about it at your local community centers, religious organizations if you belong to one, and among your family and friends. You don’t have to be a financial expert to get the conversation started. All it takes is one person to start talking so that everyone else can feel comfortable to share. The results could be astounding! Use the power of community to better your own life and the lives of those around you. Together, we can prevent future economic turmoil and lead the way to bright financial futures.
Image Credit: dcJohn