How Can We Improve Through Financial Education
Financial literacy is the basis of financial well-being.
The financial state of many Americans is not where it should be. According to a Mind over Money survey, more than three in four Americans feel the pressure, with 77% reporting they are anxious about their money situation. The majority of people are so preoccupied with money that they can't control it or even relax when making decisions around the topic. The current economic climate has only made the situation worse.
Two-thirds of the country is struggling with money issues: Not having enough for retirement or keeping up with cost-of-living expenses are everyday worries among a lot of men and women. Though there are many reasons for this, one major contributing factor is lack of awareness.
Why financial education and literacy is crucial for everyone?
Financial education is a broad term that can be defined as any learning that helps people make informed decisions about managing their finances. It's essential for many reasons, but one, in particular, stands out: Financial education offers a solution to the income gap.
Financial education and literacy are the first steps to economic well-being. It is a continuous and crucial process that should include:
- Everyone with subprime credit
- Disadvantaged communities
- Young adults who have never had any sound experience handling their finances
But here's the catch: The finance industry is full of misinformation. It can be challenging to navigate the mainstream system without knowing that there's more than what meets the eye regarding your finances.
How can organizations help raise financial awareness with education?
Financial organizations can play an essential role in raising awareness and improving the economic situation for all Americans by educating people on how they can take control over their finances through tools like budgeting and saving.
They also need to work with other organizations to assist those who need help to not feel ashamed or embarrassed about their situation.
Financial literacy is an important issue that organizations are starting to take on, as more than half of adults in the U.S. feel they don't have enough knowledge about managing their money. Financial education takes different forms, but it typically includes:
- Teaching children how credit cards and bank accounts work.
- Providing informational seminars about retirement savings plans for disadvantaged communities.
- Online forums where people can get legitimate information about financial systems, and how they can use them to their advantage.
- Instilling knowledge about finances at early ages
Financial education needs to start early because children learn about spending money at an earlier age. We must give them the knowledge of how to save and invest early on as well. The financial services community, non-profit organizations and schools must be proactive in engaging all communities. Breaking down the information into relatable, easy-to-understand curricula could create a whole new generation of financial geniuses.
When should consumers be engaged in financial literacy and awareness?
Financial education begins in the classroom, but it needs to extend throughout adulthood. One size does not fit all when it comes to this critical topic. We have to create customized programs for each age group based on their stage in life or needs.
Every consumer has a different baseline understanding of the financial system and engages in it at varying points throughout their lifecycle.
Let me give you a few examples of how and when people get involved in financial decisions:
- Students who are looking for information on securing or paying off student loans
- Car buyers who are looking for the best car lease options
- Families may also approach certain financial aspects differently because there can often only one parent is working outside the home while raising children
- Older adults who are going to retire soon
These are great opportunities for financial organizations to reach out with informative content to help consumers better understand where they need to improve.
How do we include more consumers in the mainstream financial system?
The mainstream financial system has been inherently designed to exclude those without access or means. Such consumers who do not have good finances are not welcomed warmly in the financial system. As a result, they lack trust in the industry and find it challenging to navigate.
If we want these people back into our economy, we need partners who understand how hard daily life can be when you don't have any money. Building trust begins with partnering for the greater good. Partnering starts at home and moves outward to building coalitions that include people who have been historically excluded from mainstream finance.
The financial world is changing, and the way we interact with money is evolving. The global economic landscape poses new challenges and opportunities for people around the world. Financial inclusion and financial status may seem like a consumer problem, but the reality of improving overall financial well-being falls on more than just an individual.
Financial literacy is the key to improving financial inclusion. If consumers are not well informed about their finances, they will never be able to make informed decisions or participate in society's mainstream economy with confidence. Hence, it's all about financial education.
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