Financial literacy is something that everybody needs. Various decisions we make depend on our understanding of money. Financial literacy is a bit lacking in the United States, however. Several people enter adulthood without a firm grasp of it. And still, most of us deal with money daily. Whether it is paying bills, applying for a credit card, and investing, we are continuously exposed to money. As a trusted wealth management company, YMA Wealth Management Group wants to help educate anyone as early as possible for a brighter financial future.
Financial Literacy in the US
For understanding the reality of financial literacy in the US, it helps to consider how it is taught in schools. More and more data are being gathered to help us understand the gaps. The 2017 report of Champlain College gives 5 states an A grade for their financial literacy efforts. They list many statistics that show a gap in financial education among students. Champlain is far from the organization taking notice.
As per NPR 2018 study found that 36% of students were financially at risk. And as per Next Gen Personal Finance, 16% of high school students are needed to take a personal finance course to graduate. In 2012, FINRA discovered that as many as 56 percent of people didn’t have a rainy-day fund. There are endless statistics that may be used to gauge the overall image, but most of them recommend there’s much work to be done.
Financial Literacy Crisis
A lot of Americans are making financial decisions with less financial knowledge. The TIAA Institute as well as George Washington University conducted a survey on United States financial literacy, asking 28 basic questions about retirement saving, budgeting, debt management, as well as other financial matters. The average respondent answered half of the questions properly. Another study discovered that 1 in 4 American citizens aren’t paying bills on time.
Financial success rarely occurs by accident; it’s the outcome of a journey that begins with education. One of the obstacles to great financial literacy is the Lake Wobegon impact. In other words, we all consider ourselves above average, and also based on that belief, it follows that our financial understanding is above average. Unfortunately, this assumption has a flaw: it can discourage us from learning as much as we want to continue adapting to an ever-changing financial landscape. The more informed we are, the more informed our financial decisions can become. Fortunately, we may consult a huge range of resources in pursuit of great financial knowledge.
Legislation changes in the United States
It is not all bad news, however. We’re seeing legislation changes through the United States. As a result, more high schools are needing students to complete a minimum of one personal finance course. A report says that 17 states adopted resolutions that are related to financial literacy in 2018. And as per the Brookings Institute, 21 states need financial literacy courses.
The increasing student loan burden
Recently, we’re seeing additional headlines around the total student loan debt. Currently, the total stands about $1.6 trillion. There are several reasons the student loan burden is growing. One reason is that the price of college is increasing much quicker than inflation. Another may be that the wages of new college graduates have stagnated relative to inflation.
Although we can’t point to any one cause of this growing issue, lack of financial literacy can play a role. Because the price of college is increasing, students are taking on a rising amount of debt to pay for it. Students keep on taking the debt because they expect to pay it off in the long run. This’s yet true, but the increasing price of college means growing student loan amounts. And new college graduates cannot understand the implications of so much debt. They can be capable of seeing the numbers on paper, but that’s one small piece of the picture. What they cannot be considering is how their student loans will fit in with all their other expenses. They can have rent and mortgage, food, a car payment, insurance, food, and a slew of other prices.
Credit card use
Another form of customer debt that’s on the increase is credit card debt. More and more people are turning to credit cards, even for basic expenses. In several ways, credit cards may be more harmful than student loans. One of the main ways they may cause issues is their high-interest rates. It is well-known that credit cards have higher interest rates, still, people are relying on them more than ever. As per an estimate total debt is now over $1 trillion. It is $197 billion high than it was in 2013.
Baby Boomers and Generation X possess the most credit card debt. That means Millennials the younger generation have less. Nevertheless, the increase in credit card debt is concerning. Interest rates may make them increasingly hard to repay. This can cause the issue to spiral in a few cases. This’s something to keep an eye on especially if we see an economic downturn in the near future. Credit card debt can be devastating to your credit score thus you will want to hire an expert credit repair company.