Financial Education is the Smartest Investment
Ignorance can be very costly, especially when it comes to your finances. Investing time and energy into financial education is one of the smartest investments you can make.
Financial literacy is the education and understanding of various financial matters. It focuses on the ability to manage personal finances, and it includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement, and tax planning.
Raising one’s financial IQ helps individuals become self-sufficient, so that they can enjoy financial stability. Those who understand the subject should be able to answer several questions about purchases, such as whether an item is required, whether it is affordable, and whether it an asset or a liability.
The lack of financial literacy can lead to becoming overwhelmed by debt and making poor financial decisions. For example, the advantages or disadvantages of fixed and variable interest rates are concepts that are easier to understand and make informed decisions about if you possess financial literacy skills.
Based on research data by the Financial Industry Regulatory Authority, almost two-thirds of Americans are financially illiterate. They lack the basic skills to reconcile their bank accounts, pay their bills on time, pay off debt, and plan for the future.
Another study showed that an astonishing 76% of young people demonstrate a lack of basic financial literacy. That’s a scary thought.
Miriam Webster defines IQ as “proficiency in or knowledge of a specified subject.” Your financial IQ depends on your ability to understand the various terms and concepts which make up the subject of finances.
The truth is, financial literacy is an essential skill you must develop if your goal is to build wealth and enjoy financial security and well-being.
Financial literacy provides a long list of advantages. It increases your earning potential. It increases your return on investment. It improves the quality of your life and finances. It defends your portfolio from unnecessary losses. And it provides peace of mind around money.
Peace of mind alone should be enough of an inspiration. According to the American Institute of Stress, over 70% of people experience physical or psychological symptoms caused by stress.
And what of the disadvantages? Well, it takes time, effort, and energy. That’s it. That’s all there is as far as the drawbacks. People are busy, and it takes a focused amount of time to educate oneself on anything.
But don’t the pros exceed the cons and that it shouldn’t even be a discussion?
And what’s more, it costs little, risks almost nothing, and its rewards are huge. Your financial intelligence will compound over time just like your money.
Educator, Sir Ken Robinson may have said it best when talking about education. “A gardener does not make a plant grow. The job of a gardener is to create optimal conditions.” Similarly with your financial education, it is your job to create optimal conditions for your money to grow.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC