April is Financial Literacy Month, a time when we recognize the importance of financial literacy. If you recall, we talked about this last year, and the disturbing fact that for too many Americans, a solid understanding of how to manage their money is simply beyond their grasp. Since then, even more economic pressures have been applied to American families as we move first from an economy devastated by a pandemic to an economy devastated not only by inflation, but by a war in Eastern Europe, as well. At no other time, in recent history at least, has a thorough understanding of money management been more essential. As you can imagine, there is no better time than the coming months, when the focus will be on financial literacy, to talk about the importance of sound money management.
It starts with our children
According to the Council for Economic Education, fewer than a third of the high schools in the U.S. require high school students to take a personal finance class in order to graduate. And one in five 15-year-olds in the U.S. lacks basic financial literacy, according to the Program for International Student Assessment, as outlined in a US News and World Report article, “8 Scary Financial Statistics and How to Avoid Becoming One,” Concepts such as student loans, interest rates, qualifying for a mortgage, credit, and balancing a checkbook are proving to be foreign concepts to many Americans. Studies conducted by the FINRA Education Foundation have revealed disturbing facts such as this one: “Americans demonstrate relatively low levels of financial literacy and have difficulty applying financial decision-making skills to real life situations. Study participants were asked five questions covering aspects of economics and finance encountered in everyday life. 66% of those surveyed are unable to answer more than three of the five questions correctly.” To add to the bad news, another study by the National Foundation for Credit Counseling® (NFCC®) reveals that only two in five U.S. adults have a budget and follow it.
What happens when young people do not achieve a good foundational understanding of money management? They become the elderly Americans who are not prepared for retirement, of which there is an absolutely staggering number. According to a pre-COVID 19 survey done by the Federal Reserve Board, around 40% of U.S. adults do not have enough money in their savings account to cover a $400 emergency or household expense. That financial situation has, unfortunately, worsened for many Americans.
Given the uncertain economic times we now face, and we could face tough times for quite some time, it’s critical that young people know how to earn, save, invest, and spend their money. And as a financial institution, the lessons you help their parents teach will benefit them (your customers), their children (your future customers) and, therefore, your bottom line. By providing your customers with just a few of the basic tools that they can use to educate their children in financial literacy, you can enhance your brand image while helping your future customers better understand, and value, the products and services you offer.
Since bankers are experts in the principles of money management, being involved in consumer education programs is a natural fit for them. Bankers are stepping up, and must continue to do so, in communities nationwide to participate with financial literacy programs that are directed towards younger children, high school students, adults, as well as senior citizens and those with limited access to financial services. This is especially critical in community bank areas where many individuals are either unbanked or under-banked.
One example of stepping up is the Oregon Bankers Association, or the OBA, is pleased to have provided a Financial Education Resource Guide for teachers, bankers, and the general public. Here they provide the tools for managing all aspects of financial life - from creating a budget to managing your credit and protecting your identity. By setting up a time to go into schools you can give students and faculty information about financial literacy. And, help promote your bank.
Want to Get Involved? Please do!
You don’t have to be a legislator, educator or finance guru to get involved in Financial Literacy Month. Any bank can help educate the public about financial literacy at any time. This movement can help bring awareness to the problem lacking financial literacy among our children and young adults.
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