Financial literacy is the ability to understand how to make sound financial choices so that you can confidently manage your money over the course of your life. The full breadth of financial literacy includes a wide array of financial skills, ranging from the basics (such as setting and maintaining a budget and properly managing credit cards) to the more complex (things like navigating tax regulations or diversifying investment portfolios).
Developing these skills from an early age is a crucial step on the path toward financial security. When you're financially literate, you're able to allocate your income toward various goals simultaneously—not just to ongoing expenses, but to savings, debt repayment and rainy-day funds. You can navigate the financial marketplace with self-assurance, and you have the tools to thoroughly research anything from loans, to credit cards, to investment opportunities.
Unfortunately, however, a host of recent studies show that far too many individuals and families across the country and around the world struggle with basic financial education.
According to Standard & Poor’s Global Financial Literacy Survey, less than 60% of American adults are considered sufficiently financially literate. The National Foundation for Credit Counseling found that just two out of every five American adults know how to set a monthly budget. A study from the Financial Industry Regulatory Authority (FINRA) Foundation found that more than half of Americans admit to being “financially anxious.”
Clearly, the widespread lack of financial preparation is a major problem that needs to be addressed.
The question is: Where do we start?
At Navigant Credit Union, we’ve made financial literacy education a focal part of our community outreach efforts here in Rhode Island. While we certainly haven’t found all of the answers, we are proud of the difference our team has been able to make in the financial lives of our members and neighbors.
Here are a few lessons we’ve learned along the way.
Financial literacy is a life-long journey.
Through our partnership with EverFi, Navigant Credit Union is bringing proven, student-friendly financial education curriculum into local classrooms. Our program has reached more than 4,000 students across Rhode Island, who have completed more than 30,000 financial literacy modules and logged more than 22,000 hours of learning.
Programs like this are so important because the financial literacy educational journey can and should begin at a very early age. Young children may not need to worry about credit scores or learn how to file a tax return before they reach kindergarten, but that doesn’t mean they can’t start the process of familiarizing themselves with the basics. Something as simple as teaching a child how to save up their allowance for a new toy can put them on the right track toward developing financial skills they’ll use as they’re growing up.
Individuals of all ages need access to financial education resources.
Financial literacy is not an issue unique to any age group. Whether you’re a child hoping to save an allowance for a new game, or an adult hoping to squirrel away cash for a milestone purchase like a home or a car, you need to know the basics.
There are plenty of free resources available to help people of all ages navigate their financial journeys. Navigant Credit Union offers dozens of free modules on our online Financial Wellness Center.
Finally, it’s never too late to start.
With national credit card and student loan debt trending toward all-time highs, it’s easy for individuals and families to feel as though it’s too late to learn these skills. It’s important to emphasize: This simply isn’t true. With the right preparation and access to the right tools, past financial mistakes or oversights can always be rectified. Low credit scores can be improved, and high-interest debt can be paid down.
And most importantly, financial dreams can be realized.