As you may or may not know, April is Financial Literacy Awareness Month. Shannon at the Heavy Purse organized an event today where various bloggers all write about the topic of financial literacy.
According to Wikipedia, financial literacy is:
The ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.
Basically, financial literacy covers a very broad range of topics that encompass personal finance and economics. I personally like this broad interpretation because it means there is always something additional that we can learn that will make us more financially literate. You can spend a lifetime learning about macro- and micro-economics, personal finance, corporate finance, monetary policy, etc. and still have so much more to learn.
One of the things that everyone seems to focus on during financial literacy month is how children and youth are not taught enough about personal finance, business, economics, etc. in school. I certainly think there can be a broader curriculum, especially in high school, in financial-literacy related subjects, I also think that it overshadows an important point: it’s much more important for adults to pursue financial literacy than children.
Before I bought a house, I had little interest in plumbing, electricity, HVAC, and general home maintenance. Since buying a home, I have been learning (quickly) about home maintenance, the costs involved (both time and fiscal), and how to do things like replace a sink that I would never have spent time learning if I was still a renter. Similarly, there are various software programs that I use at work that I did not use until I started my job. What I’m getting at is this: youth don’t care as much about personal finance because they don’t see how it applies to their life.
Once you are out of high school and are technically in the “real world,” personal finance issues start to have a direct effect on your life. You have to make sure you have money for rent payments, car payments, and other expenses. Yes, it would be great to have a primer from a school curriculum, but there are a ton of resources available to learn about any and all personal-finance topics. If we are worried about financially literacy, we should be much more concerned about apathetic attitudes towards it of adults, not children.
The challenges of financial literacy are that it is a complex topic, one that requires time to understand and something that can easily be put on the backburner. In our busy lives who has time to sit down and track their finances at a detailed level, or learn how to understand financial statements and investments? Besides time, apathy or feeling that we don’t really need to understand finances is probably the biggest culprit for a lack of financial literacy.
Let’s look at the bright side: if you want to understand finance and economics the resources are readily available. Whether it’s reading a blog like this one, or one of the many others out there, or reading one of the thousands upon thousands of books dedicated to the topic, there will always be something that we can do to become more financially literate.
This year I hope to learn more about taxes, stocks, and online income. I’m sure there are other topics I will dive into, but I think it’s important to have a few areas that you hope to become more financially-literate in.
My question (and challenge to you) this financial literacy month is: what areas do you plan on becoming more financially literate in?
This post is part of the Financial Literacy Awareness Month Blog Carnival organized by Shannon at The Heavy Purse.
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I have to agree that youth don’t care because they fail to see the correlation to their own lives. I know that I didn’t care all that much. Even as I grew a little older I struggled initially. As long as I had money (or credit) to pay rent, buy food, and drink I was set. Now, I wish I had done things a little differently.
Good post DC! I think a big reason why children do not see a correlation is because it’s not made tangible for so many of them. Children are such concrete thinkers that you really have to make it easy for them to understand. That said, I do agree that it is easy to see how it correlates to you while you’re in the middle of a situation.
yes it doesn’t really apply to young people but teaching it early would help them avoid mistakes in college and on their first job. It is much easier to learn something as a kid than trying to change a habit as an adult.
For me personally I want to become more literate in unconventional sources of income. I think I know a fair bit about the standard ways to get and save money, but only recently have I looked into the idea of side income and I like the way it sounds.
Good one DC. I plan on using this month and a few more months after to learn more about investing, especially dividend stocks. I want to have my money make more money. I do think that we need to work harder to get children to understand the basics of money. We need to put them in scenarios where they learn how to deal with bills way before they hit the real world. It is a harsh world when you are just thrown into it. If we teach a few easy lessons prior, then they will be setup for a much better life.
No not enough finance, just checking,savings & loans need to be brought to the classroom. When I was a banker the State Bankers Association would sponsor days where I would go to the classroom on career day and for scheduled class home to teach the children up to the high school. Check with your state bankers association or a local bank.
@Margee I also do a program where I go into elementary schools and teach about business. It’s called Junior Achievement, have you heard of it?
@DC @ Young Adult Money I attended Junior Achievement for 3 years while I was in high school. I loved it. We met in a building separate from our school though. How long have you been doing that for?
@DC @ Young Adult Money I don’t. We always got material from our state bankers association. Some states have formal programs, I guess?
I understand what you are saying but I think by high school when kids are 16 and 17 that basic courses with practical lessons would be helpful. But many times we don’t learn anything well until we really need to, such as you learning how to repair things in your home after buying it. Sometimes that is just the way life works. The lessons happen when we need them most.
@TacklingOurDebt Haha yes I had a lot of “on the job” learning with our home the past 6 months ;)
Thanks for participating in the carnival, DC. I really appreciate it! You bring up some interesting and good points. That’s one of the things I love about blogging is getting different people’s perspective. Obviously, children’s financial literacy is incredibly important to me since that’s what I built my site around, but at the same time – I don’t disagree with you either. I think they are both incredibly important and the apathy towards financial literacy in adults in a HUGE concern because they are current parents or future parents. So if they don’t care, why will their kids care? They won’t. Becoming financially literate isn’t something you can check off your list and mark it done. It’s always evolving and growing and as you point out – there are a ton of great resources to help people. I do believe we need to start working with children when they are young and haven’t formed strong habits or beliefs around money. All in all – from young to old – there is a lot of work to be done and I’m glad there are so many diverse voices chiming in and offering support. Thanks for being one of those people!
My personal challenge is to learn more about investing! The biggest factor of needing financially literate adults is they become financially literate parents, who hopefully pass on good behaviors to their children. Economic lessons in school would be great, but financial literacy also needs to be taught in the home.
@BrokeMillennial I agree. I’m sure in many cases where people are financially literate they either did it because of their parents guidance OR because their parents were financially ILLITERATE. Motivation can come from either extreme ;)
I need to become more financially literate in the world of investments. I feel it’s a piece of the puzzle I’m missing.
@Beachbudget Same here. I have some (very) basic knowledge, but not nearly what I would like to have.
Sadly, even though there are lots of resources, many people don’t try to learn how to be financially literate until they are already in a bad position. I think if you learn about money early on, it might not apply, but you have the foundation to fall back upon when it does. I think if your parents show you how to comparison shop or look at interest rates, you are much more likely not to go down the wrong path when it’s time to make those decisions. I would have never called my parents to ask financial advice because we just never talked about it, even though they would have had some good suggestions. It just wasn’t ever on the radar. I hope to talk about all those things and maybe my daughter will ask my advice when she’s faced with a huge financial decision. Maybe not, but I can always hope.
I believe that parents and children can learn about personal finance together. We don’t spend nearly enough time together and I think it’s a great way for both parties to learn something.
I’m with Beachbudget in that I would like to learn more about investing. We were all set to talk to a financial advisor but when they mentioned talking about IRAs and Annuities…I had no idea what she was talking about so we postponed it.
I think you are right to some degree that youth don’t care about personal finance as they don’t see how it applies to their life. My parents did teach me how personal finance applied to my life but having me purchased what I wanted out of the money that I earned after school, weeknights and weekends when I was young. Not all parents are like my parents though. I learned that if I wanted my money to grow I couldn’t spend it and if I wanted something I needed to pay cash for it because where else would I get enough money to pay for it in full without the cash. That was my mindset growing up and still is today. I agree with you that if one wants to learn about personal finance the resources are out there and free just for the looking. Cheers mate.
If we break financial literacy down into different tiers – it would be much simpler to tackle different areas without making the whole process seem overwhelming to financial novices.
As DC stated: it’s not just youths that need a better financial education; we’re all guilty of being uncertain about specific areas of our finances – much like Beachbudget, I could do with learning more about investing too!
If I tackled investing as part of financial literacy in the broadest of sense – I’d probably end up getting lost in the additional areas of FL.
However, if I tackled investing as a single module or subject – I think I’d stand a much better chance of being able to take the information in, and then being apply it in my life.
The short of what I’m trying to say is: for financial literacy to be successful – it needs to get broken down to account for a wide range of learning curves.
Daniel
I view financial literacy like a pyramid, with different tiers and sections. To properly see a pyramid, looking at it from a far (or broadly) means that you won’t really ‘see’ the whole pyramid – I feel the same can be said for financial literacy.
If we view each part of a pyramid individually, we end up with a much more thorough picture of the whole pyramid – I think this is the best way to look at financial literacy too.
As DC stated: it’s not just youths that need a better financial education in the adult world; as adults, we’re all guilty of being uncertain or not having enough knowledge about specific areas of our finances – much like Beachbudget, I could also do with learning more about investing!
The short of what I’m trying to say is: for financial literacy to be successful – it needs to get broken down into chunks.
We all learn at different rates and speeds – so teaching financial literacy should account for this, therefore, people with different learning capabilities can be catered for and not shunted aside for those with more proficient knowledge.
Daniel
My knowledge of stock market investing is definitely limited. I have some knowledge of what things like stop-losses, interest rate swaps and things like that ARE because I used to develop software for a financial services company, but I don’t know how to apply them effectively to my own portfolio.