A Financial Education That Will Last a Lifetime

A report from S & P Global has shown that only one person in three throughout the world is financially literate. This is reflected in personal debt, lack of savings, no provision for retirement, and poor budgeting skills. 

The picture in the states is no better. Americans owed $14.6 trillion in debt by halfway through 2021. This means that the average American had personal debt of over $90,000 during that time. This figure has risen since. 

Gaining a financial education should last a lifetime, yet it isn’t something that is featured heavily in the school curriculum. Instead, children rely on their parents to help with this form of education, and to learn life skills for finances. 

Why should you learn financial literacy?

It appears that in the states, only 1 in 6 students is required to take any type of course in personal finance. This can point to a lifetime of replicating the same mistakes, and also a lifetime of debt. 

Resources such as Wise About Money are helping young people to understand about their personal finances, and how to manage budgets. 

Understanding how to manage finances can mean avoiding debt traps, repaying student loans easier, saving for emergencies, understanding interest rates, and being prepared for retirement and later life. 

While this short article cannot provide a full financial education, it can point out some small areas that you may want to work on or consider. 

Preparing a budget

One of the keys to staying financially solvent is to set a budget. One of the most teachable moments is when a parent first gives a child an allowance. This is when budgeting could be introduced and set up good habits forever. 

Apart from setting limits, you may need tips for sticking to your budget also. It can be easy to get tempted to stray, but then that is what savings are for, more on that later. 

Setting a budget is simple. Look at your total income. Then look at all your necessary outgoings. These are the bills that must be seen to such as mortgage, and rent. The difference between these is your disposable income, presuming you are solvent. 

From this leftover money, you can work out a budget that suits your needs, and allows for some savings hopefully. 

Getting away from debt

Millions of Americans need to get help to get out of debt, and if you are one of them there is no shame in that. However, ignoring debt can lead to a lifetime of financial misery. 

Pay the absolute minimum on credit card debt if you have to, but ideally, you should always pay more. Look at your overall debt and see which part is the easiest to clear. One tactic is to work on one area hard while servicing the others at a minimum. 

Once that first debt is cleared, you can tackle into the next one. Understanding how to budget your disposable income will help you to clear your debt. 

Student loans

Every year, thousands of students leave education with a pile of debt. It seems almost normal to have to start adult life saddled with student loans. 

You may qualify for one of the student loan forgiveness programs. Check with Student Aid to see if you can get help here. 

Understanding the need to save

Budgeting doesn’t just mean being able to comprehend how much free money you have. You should also think about saving. The benefits of this are enormous and will carry on with you for life. 

Instead of using credit cards and lining up more debt, how about being able to withdraw your own cash from a savings fund? One general rule states that around 20% of income should be placed into savings. This goes hand in hand with making a budget of 50% of income for necessary bills, and 30% for your own enjoyment. 

Emergency fund

Understanding financial literacy can mean being in a position never to worry about emergencies. Savings should be considered for the long term, or for a purchase you want in the future. 

An emergency fund is exactly what it says. Something you keep to one side for any time that something goes unexpectedly wrong. The significance of having an fund for emergencies  cannot be overstated. 

Some experts suggest an emergency fund should cover around 3 to 6 months of your necessary expenses. However, if you are trying to clear debt, concentrate more on this, but still keep some kind of emergency savings too. 

Investments

If you are working your way out of debt then investments might not seem important. But thinking about the future can never be done too early. Consider taking out some type of retirement fund as early as possible to make your later life more comfortable. 

More than one-third of Americans are without a 401K, and many will face an uncertain later life as far as finances are concerned. 

Summary

There are plenty of teachable moments as a child, and ideally, every parent would provide some personal finance education to their offspring. Yet, many adults are as clueless about finances as children are. 

Sadly, the educational system doesn’t deem this area to be more important, but you can educate yourself, and take control of your finances for life.

Share This Post

Post Comment