If you keep up with financial current events, you may have noticed the latest buzz around financial literacy. Since the passing of Senate Resolution 316 in 2004, April has been officially recognized as Financial Literacy Month. This 30-day promotion was first proposed as an effort to encourage Americans to learn more about personal finance. Today, National Financial Literacy month is celebrated by many of the country’s largest financial institutions and non-profit financial organizations through promoting educational content, social campaigns, and on-site company events.
Let’s first start by understanding what financial literacy is and why it is important to overall financial health.
Financial literacy simply refers to a person’s ability to understand how money works when it comes to managing it. It involves developing a knowledge of basic financial concepts and having the necessary information to make informed decisions about money. Basic financial concepts include budgeting, saving, investing, and credit and debt. It also includes comprehending financial terms and concepts such as interest rates, compound interest, and inflation. In essence, financial literacy is the foundation of good financial decision making, both in the here and now and in relation to longer-term goals.
Now that we’ve got a grasp on what financial literacy is, we can start to look at the bigger picture and how we build on it. To truly benefit from becoming financial literate, you must be capable of applying what you’ve learned to your life. For instance, developing a savings plan to help you achieve a specific financial goal and following through on it. Or taking advantage of your employer’s financial resources, such as retirement plans or financial wellness programs.
The awareness around financial literacy is worth celebrating but is a month of publishing educational content and hosting lunch-and-learns really effective in changing people’s financial behaviors?
The answer is no — and here’s why: The reality of personal finance in the United States is concerning. More than half (64%) of Americans are living paycheck to paycheck. For most, this means that even a $400 unexpected expense (think: a medical bill or a faulty transmission) would be completely unaffordable without borrowing money or selling assets. Additionally, the average American has over $6,000 in credit card debt. Not to mention, healthcare costs are rising right along with the number of people who aren’t saving for retirement.
The fact is, everyone has different factors or circumstances that make up their financial health. Financial education is not a one-size-fits-all approach. While education is a crucial puzzle piece of the foundation of financial wellbeing, it is simply not enough on its own. Being financially literate gives people confidence, but working toward financial wellness or wellbeing means using that confidence to make sound financial decisions and live a financially fit lifestyle.
So, what can be done to move our country in the right financially well direction? This answer is simple. Employers can offer holistic financial wellness solutions to their employees to help them improve their financial literacy, empower them to make better financial decisions, and provide personalized guidance and accountability with financial coaching.
Historically, financial education was hard to come by—most of us were not taught it in school, and we certainly didn’t have family discussions about money. Fun fact: 56% of people think that talking about money at the dinner table is completely taboo. To help bridge the gap, Questis is offering a free library of Finance 101 content written by certified professionals and hosted on their website. You can access it here.