Financial literacy can mean difference between ‘good life’ and ‘poor house’

Few Americans track their spending

Merdies Hayes | 4/8/2016, midnight
Aside from a rousing session of Monopoly, most Americans don’t give financial literacy much thought.

Aside from a rousing session of Monopoly, most Americans don’t give financial literacy much thought. In fact, only 40 percent of adults will maintain a budget and track their spending. That’s what the Jump$tart Coalition has discovered, and it may ring true through practically all social groups. The average American does not possess a sufficient financial education or, at a minimum, does not understand how to apply this knowledge to the real world. Jump$tart advises financial literacy among pre-school through college-age youth.

Americans owe $11.5 trillion to lenders

In brief, financial literacy is the ability to use knowledge and skills to manage financial resources effectively over a lifetime for financial well being. Why is this knowledge important for young people? Take a look at the average credit card balance of any 20-something, and you’ll see how vital it is to keep track of finances. Nearly 10 percent of post-college students have a credit card balance averaging just over $7,000, excluding financial aid repayment. Poor financial management like this usually means that by middle age most people (three-fourths of American families according to Chase Blueprint, a new system the New York-based bank uses to review credit card activity) will be living paycheck-to-paycheck. More than one-fourth of American families have no savings at all.

Today, American consumers owe about $11.52 trillion to lenders and creditors. This debt burden tends to balloon each year. And how about student loans? In 2014, student loan debt had soared by more than 11 percent. There’s more grim news because only 50 percent of American families have more than three months’ worth of expenses saved. Nearly as many—43 percent—are concerned that their savings won’t be enough to cover unexpected costs or emergencies. Chase Blueprint took time to divide various financial statistics by age group and found that among those persons ages 45 to 54 years, the median saved for retirement was $101,000. That may sound like a lot of money, but it really isn’t considering a typical retirement age of 65 years ... not to mention expenses seniors (those fortunate to have a fixed income by mid century) will likely incur over an increased life span. And, because the Social Security trust fund is expected to be exhausted by 2033, 38 percent of adults are concerned about being able to retire on time—if they can afford to retire at all.

Schools lack in financial education

Most adults wish they had financial coursework in school. Only 5 percent say they were taught about money by a teacher, and 40 percent say they would give themselves Cs, Ds or even Fs on their grasp of personal financial concepts. A full 85 percent of parents believe that financial education courses should be a requirement for high school graduation. Teenagers are listening to the dire American economic forecasts, and 52 percent of these young people want to learn more about how to manage money because they’re interested in budgeting, saving and investing for the future.

Celebrity economists such as Suze Orman and Robert (“Rich Dad”) Kiyosaki insist that early knowledge of money, management can be a key to mid-century financial wellbeing.