Financial Literacy as a School Subject in 2021

Why should financial literacy be taught at school? What financial skills are crucial in a person’s life? How to teach young people to be financially aware? 

 

Financial Literacy Importance in 2021

Based on the test by FINRA (Financial Industry Regulatory Authority) only 34% of consumers know key aspects of inflation, interest, compounding, bond prices and diversification. Taking into account that those are crucial aspects of financial literacy, there are still 66% of financially challenged people that face living from paycheck to paycheck and possible issues with avalanching debt.

Seeing that the issue of financial illiteracy is this big, it may be suggested that this should become a compulsory subject at schools and universities. No matter what subject students major in, inevitably they all need knowledge of handling finances.

What Skills Financial Literacy Consists Of

1.     Budgeting Basics

Budgeting is a daily skill that helps to track where the money is going and what you can save on. Budgeting isn’t a prerogative for students whose major is math. With easy online tools and free budgeting apps everyone can manage their budget via a smartphone, even being a college student, having a clear budget shows how much money goes on essentials and what you can afford to purchase except the necessities.

2.     Comprehending Interest

Understanding interest comes in handy when you have to deal with loans. Interest rates are what loans are based on and in order not to be consumed by mounting debt, you have to know how to calculate the interest and whether you can afford the loan altogether.

Students are the ones who deal with interest rates first hand. Back in 2019 student loans alone were responsible for 1.4 trillion of consumer debt, which is even bigger than the sum of auto loans and credit card debt.

For the student loans issues not to drive you away from loan opportunities forever, you should research trusted installment loans reviews from Fit My Money and find reliable lenders that offer affordable interests.

3. Knowing How to Save

Seeing retirement as a point in the distant future young people rarely understand the importance of starting to save now. However, even the little money you save as a student will serve as a valuable financial skill in the long run.

It’s easy to start saving just $5 a week or moving slowly towards a financial goal. When it is achieved, you can move on to a greater one and gradually obtain the skill.

Another “stash” to have just in case is an emergency fund. You never know what you might need it for: health issues, car broke down, or being behind on your utility bills.

4. Understanding Debt Specifics

Credit history begins with the first usage of a loan or a credit card. Having huge debt for college already, you may want to wait a little before taking more. Of course, having credit card balance is really handy for emergencies or necessary big purchases that you want to spread out a little. But if you do use the card, keep in mind that debt has to be repaid someday. Don’t splurge with the money you don’t have. It’s better to be disciplined with money and develop a healthy financial habit early on.

5. Safety

Financial information of a person probably costs more than their personal details. Since identity theft cases are growing by the minute, one can never be too safe with financial transactions online.

To be on the safe side, choose websites, you disclose your banking account to, that have a strong SSL. Also, never buy anything from a public computer where you can’t know how your financial details may be used in the future.

How Financial Literacy Can Work for You

Financial transactions have changed greatly over the past decades. With such huge availability of credit cards consumers have moved to paying for all of their purchases and other daily expenses with credit balance.

Many have also appreciated the simplicity of taking online loans and covering big and small expenses with short-term loans. However, for some the simplicity of spending loan money isn’t the same as paying it off. This resulted in $4.2 trillion of consumer’s debt in 2020.

The inability to pay the loaner back prevents consumers from appreciating the full potential of loan possibilities. That’s where financial literacy skills are best utilized. Knowing which loans are suitable for various financial purposes (business loan, weekend loan or a medical loan) and what loan features are the most profitable ones are markings of a financially aware person.

Being a financially literate person is being one’s financial advisor. Since people do most of their money transactions themselves (planning retirement, online trading, covering various kinds of existing debt), they don’t have to hire an accounting advisor and add another expenditure item in their budget.

Financial Literacy Implementing Strategies

Education is power, but being educated money-wise is foremost. Facts show that regardless of one’s educational background and the size of income, financial ignorance is one of the 21st century diseases.

The thought of financial planning alone brings more stress into people’s lives than a regular visit to a health care institution.

However, there is still hope for the younger people.

U.S. National Strategy for Financial Literacy developed in 2020 demonstrates ways to improve financial literacy.

The U.S. Department of the Treasury Financial Literacy and Education Commission is working to inform young people of successful financial practices and choices.

In order to fully immerse into financial literacy study, here are the steps to take.

  1. Provide the younger with relevant up-to-date information
  2. Help young consumers interpret financial information and learn money decision-making
  3. Focus on motivation. Moving towards a clear money goal is more real at a given time than learning the importance of retirement planning.
  4. Ease the following. Even starting off with good intentions, people may find it hard to keep their financial promises. Adjusting the plan to existing circumstances and changing ways to achieve financial goals may bring motivation back.
  5. Give continuous professional support. A single lecture of financial literacy may not do the trick. Having unending professional assistance helps financial literacy subjects stay on track of their progress and not lose focus of the final goal.

The stated reasons above clearly show the necessity of having financial literacy lessons at school, let alone at university. Methods and strategies of gaining financial awareness exist and are ready to be used. One just has to remember the importance of those skills throughout their whole life. 

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