Too many Americans learn about money the hard way. We make an expensive mistake. Weeks later, we discover that we had better options. We try to remember the lesson we learned to do better next time. Only next time may be too late. Our largest transactions only happen every once in a while, like borrowing a mortgage or buying a car. When we miss the opportunity to win in these moments, we may not get a second chance.
Many Americans lack proper financial education. Families often view money talk as taboo. Few school curriculums teach more than counting coins and bills. It comes as no surprise that a recent study by Quicken found that one-third of adults surveyed say no one taught them about money when they were younger. The study also found that those individuals report much lower confidence around finances as adults.
Better financial literacy correlates with higher income and more opportunities. The Quicken study further found that people who learn about money early in life are 3x as likely to have a personal annual income of $75,000 or more as adults. Money does not buy happiness, but having enough for comfort makes a difference. Families with higher incomes may more easily afford college tuition, extracurricular activities, standardized test tutoring, and more.
Lessons around debt seem to burden Americans the most, regardless of age or what we think we know about personal finance. Young Americans, ages 18 to 29, owe a combined $1 trillion. You might assume that older, wiser generations owe significantly less. You would be wrong. Americans between the ages of 40 and 49 owe the most: $3.4 trillion of consumer debt. Surely, we have things figured out by retirement? In short, not quite. Americans between ages 60 and 69 still owe a staggering $2 trillion.
Interest owed on debt washes away gains earned on investments and savings. With trillions of dollars outstanding in principal, Americans owe an enormous amount of interest. For many families, owing less interest means more cash in the household budget for home maintenance, kids’ activities, school supplies, or retirement savings.
Our financial education influences how well we teach our families about money. People who learn about money at an early age are 20% more likely to prioritize teaching their kids about money. Some of the most common teaching tools include tried-and-true methods like adding coins to a piggy bank, earning an allowance, managing a personal checking or savings account, or saving for a specific purchase like a pet.
A comprehensive personal finance education must go further. A modern education, for parents and children, needs to teach lessons using modern tools. In the world of TikTok, Instagram, and Fortnite, cash seems as antiquated as a typewriter. Fifty years ago, putting money into a piggy bank more closely resembled depositing cash in an envelope with a bank teller. In 2020, we may use five different apps in a single day to make a payment, check savings, invest in the stock market, or shop for credit - all from the phones in our pockets.
Whether you want to learn more about personal finance for yourself or your family, make sure you do the research. Reading the Safely Finance blog is a solid starting point. Consider reaching out to a family financial advisor. Many offer introductory meetings at no cost other than your time.
Reading is the easy part. Things get hard when you start to apply what you learn. Growing your savings takes time, building smarter spending habits requires effort, and keeping tabs on it all can feel tedious.
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