The Importance of Financial Literacy in a Crisis
The COVID-19 crisis has caused income loss, uncertainties, and an increase in fraudulent attacks throughout Ohio and nationwide. Smart money management is more important than ever, but studies show that Americans are falling behind in financial literacy.
While the U.S. is the world’s largest economy, Investment News reported it as ranking only 14th for financial literacy when measuring the proportion of adults in the country who understand and can effectively apply financial skills. And this comes at a time when Americans are asked to take more and more responsibility for their finances by making decisions about college, consumer credit, and saving for retirement.
Kelly Slocum, Chief Financial Officer at Eaton Family Credit Union, sites, “that a lack of practical financial education for younger Americans could be partly to blame for Americans not taking responsibility for their finances”. According to the National Financial Educators Council, only 23% of kids surveyed talk to their parents regularly about money. Ohio’s high school age participants scored an average of 60%, below the national average of 65%, on the National Financial Literacy Test – a 30 question test completed by more than 53,000 individuals and designed to measures participants’ ability to earn, save, and grow their money.
Slocum also states that, “fortunately, there is extra assistance from trusted sources available during this critical time like the Consumer Financial Protection Bureau”. The CFPB has created a page specific to helping consumers protect their finances during the coronavirus pandemic. This includes guidance on planning finances for an uncertain future, economic stimulus relief, dealing with debt, protecting credit, and much more.
Ohioans can also find assistance right in their communities. Slocum states that, “credit unions exist to improve their members’ lives and offer a wide range of tools and resources to help members better understand and manage their finances”. Most Ohioans are eligible to join and enjoy the benefits. Find a credit union near you at yourmoneyfurther.com.
Financial literacy tips
Having a solid understanding of money is an important step in making sound financial decisions. Whether you consider yourself “money smart” or more of a work-in-progress, everyone could stand to brush up on their financial literacy. Here are some tips to stay on top of your finances.
- Study up. Read trusted books, magazines and online publications about money management and investing to educate yourself on your personal financial situation.
- Break out your toolbox. Take advantage of (free!) online management tools to stay organized. Websites like YNAB, Personal Capital and Mint all offer tools to help you stay on top of your finances and provide financial learning opportunities.
- Listen up. Subscribe to finance podcasts, which are a free and easy way to slip in some financial education while working or even doing chores around the house.
- Take it to the next level. Take a financial literacy course to boost your monetary knowledge. Some require a fee, but many online courses are free.
- Know the math. Being able to work through your own financial calculations is key to financial literacy. Learn the basic formulas to help you organize your money and savings percentages. While there are obviously online tools for this (see above), it’s more helpful to know how the math works.
- Learn about your credit score. Your credit score has a profound impact on your financial situation. Understanding credit scoring is essential to your financial well-being and the Consumer Finance Protection Bureau provides guidance on checking credit scores and reviewing credit reports.
- Record your spending and develop a savings strategy. Track spending over time to formulate a budget and implement a savings strategy.
- Ask around. Talk to friends, family and coworkers to find out what has been successful for them as far as finances are concerned. Who knows, you might find a financial mentor among family and friends!