The State of Financial Literacy

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The State of Financial Literacy

Money is a fact of our everyday lives and in order to live happy, prosperous lives we must be financially literate.  Sadly, the data tells us that as a society we are not properly preparing ourselves or our children.  This means every day money creates unnecessary stress in our lives and our relationships.

Here are some of the disturbing stats, and how we may be able to change them.

Overall Financial Literacy Stats

From 2012 NFCC Consumer Financial Literacy Survey:

  • 56% of American adults do not have a budget, including 22% who say they don’t have a good idea of how much they spend on housing, food and entertainment.

  • Two in five adults say they are now saving less than last year

  • 39% do not have any non-retirement savings

  • 42% of survey participants give themselves a grade of C, D or F on their knowledge of personal finance.

From Pew Research Center 2011:

  • 74% of American workers have difficulty affording gasoline

  • 65% are experiencing problems affording heat and electricity

  • 50% are unsuccessfully grappling with increased grocery bills

  • 32% have no retirement plan other than Social Security

  • 62% of the self-described “working class” portray their incomes as falling behind the cost of living.

What you can do:

  • Use free online tools like Mint.com to analyze your spending, and create a buget that works.

  • Set Up a direct deposit to your savings account for every paycheck. It makes saving fast and easy, but remember to only put aside as much as you can afford. If you try to save too much you can make a habit of draining your savings.

  • DivaCFO has free printable tools for everything from estate planning checklists to a garden budget planner.

  • It takes 21 days to create a habit or break one. Do some research and find ways to keep yourself accountable to your budget.

  • Take public transit, ride a bike, walk or carpool to cut down on rising gas prices.

  • Buy whole foods instead of pre-made items at the grocery to cut down on grocery bills, and have cooking dinner parties with family or friends to eliminate some entertainment costs.

For couples

From the AICPA Harris Interactive survey, April 2012

  • Financial matters are the most common source of marital discord; Couples average 3 arguments per month about financial matters- more than they argue about kids, chores, work or friends

  • 55% do not set aside time on a regular basis to discuss financial issues

  • 30% of adults who are married or living with a partner have engaged in at least one potentially deceitful behavior related to their finances.  Men and woman are equally likely to have engaged in potentially deceitful behavior

Financial Literacy for CouplesWhat you can do:

  • Use the My Money Checklist to develop a regular communication rhythm and good money habits

  • Develop a monthly and annual budget with your partner or spouse.  When you budget, you essentially agree in advance on your spending, replacing arguments with negotiation

  • Develop personal goals and set up a savings plan for each major goal

  • Hire a financial advisor to guide you through a comprehensive financial plan.  You could save your relationship and you’ll reduce unnecessary conflict

For Young Professionals

From the PNC financial independence survey March 2012

  • Today’s twentysomethings hold an average debt of about $45,000, which includes everything from cars to credit cards to student loans to mortgages

  • Unemployment for those 18-29 is 12.4%, well above the national rate of 8.2%

  • Young people face an increasingly complex global economy that is credit driven and puts more responsibility on individuals to plan for and manage their retirement accounts

What you can do:Gen Y in the Workplace

  • Calculate ROI for college before choosing a degree program.  College is an investment and like any investment, making it wisely takes time and research

  • As a parent, get into the habit of regularly saving for college.  Whether you can save all your children need or not, some if better than all

  • As a student, start your own savings plan for college as soon as you can work.  Consider working part-time or summers while in  school to pay some of your expenses

  • Get creative on ways to reduce college costs such as taking advance placement classes in high school, attending community college and living at home

  • Seek out classes at your local school, library or not for profit on money basics  

  • Find a mentor, someone you admire who manages their money well and ask them for their guidance

  • Make savings a habit.  Start with your first paycheck.  Sign up for a 401(k) as soon as you are eligible.  Open an after tax account and save for vacations, emergencies and the unexpected that always happens!

For Children

From Harris Interactive’s July 2012 Survey for AICPABasic Financial Education for kids

  • Parents are more likely to have talked with their children about the importance of good manners, 95%, the benefit of good eating habits, 87%, the importance of getting good grades, 87%, the dangers of drugs and alcohol, 84%, and the risks of smoking, 82%, than about the value of money and managing it wisely, 81%.

  • Children, on average, are 10 years old when mom or dad – most often mom – has the first financial conversation with them about money, according to the survey.

What you can do:

While all of these numbers and statistics may shock or even scare you they do not mean we are doomed. Money has always been a taboo subject, but for us to live in a financially literate society we need to start having these uncomfortable conversations. If we all do just a little bit to educate ourselves, our family, and our community about money we can make a huge difference!  

 Related Articles:

How to Teach Your Kids about Money at any age

5 Reasons Not to Co-sign a Personal Loan

7 Tips for Creating Prosperity

 

About the Author:

Author, speaker and fearless leader of the Prosperity People, Mackey McNeill is a passionate entrepreneur dedicated to creating prosperity in the lives of her clients and within her community. She has merged over 30 years of expertise as a CPA and Personal Financial Specialist with her knowledge of internal alignment to create The Prosperity Experience: a planning program rooted in self discovery and financial self actualization. A sought after thought leader on the subjects of money and intention, Mackey has been quoted in The Wall Street Journal, The New York Times, TIME, Money, USA TODAY, Mint.com and Reader’s Digest, along with many other publications.

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