Financial Literacy is a Critical Skill
Financial literacy is a critical skill that every person should possess. Being financially literate isn’t just a good idea; it’s something that needs to be actively worked on. The more you understand about how money works, the better off you will be in the future.
What is financial literacy?
Financial literacy is the ability to understand and manage your finances effectively, including budgeting, saving, investing, and managing debt.
Unfortunately, many Americans lack financial literacy, which can have severe consequences on their financial security later in life. A survey conducted by the National Financial Educators Council suggests that nearly 40% of people stated their lack of knowledge in finance cost them at least $500 in 2022. A large group of individuals (15 percent) said it set them back by $10,000 or more! That’s up 4 percent from 2021.
Studies show that understanding how interest rates work and why credit scores matter is severely lacking among many American adults. A recent poll has revealed that a record-high number of people are unable to answer more than seven out of the 28 basic questions about money. It is higher than any other year in the history of the survey.
A lack of financial literacy has severe consequences for individuals’ financial security later in life. According to experts, individuals with poor financial literacy are more likely to carry high levels of debt, have a lower net worth, and lack retirement savings. People with poor financial literacy may be vulnerable to financial scams and make poor financial decisions, leading to long-term financial difficulties.
Poor financial literacy has a broader impact on society as a whole.
Improving financial literacy can provide many benefits for individuals. For instance, individuals with better financial literacy are more likely to save for emergencies, plan for retirement, and invest their money wisely. They are also more likely to have higher net worth, better credit scores, and lower debt levels.
“Financial literacy is an important part of building financial security and wealth,” says Glenn Werner, Vice President of David Lerner Associates. “People with better financial literacy have a better understanding of their finances, which can help them make better financial decisions and feel more in control of their financial future.”
Improving financial literacy can lead to increased financial confidence and reduced financial stress. It’s never too late to improve your financial knowledge. There are many resources available to improve financial literacy, including online courses, books, and investment counsellors. Take the time to learn about personal finance and develop the skills necessary to manage your finances effectively.
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. 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.