Celebrate Financial Freedom Day in July by understanding what financial literacy is and how to increase the financial literacy of all Americans so they can work towards financial freedom. By definition:
“Financial literacy refers to the set of skills and knowledge that allows an individual to make informed and effective decisions through their understanding of finances. Education on the management of personal finances is an essential part of the planning and paying for postsecondary education.”- Webster’s Dictionary
Financial Literacy includes having a basic understanding of how to pay bills online, manage bank accounts, manage debt, fill out income tax withholding forms at work, and understanding how to save and invest. If financial literacy is education, should it be taught in school?
Unfortunately, many school districts do not offer a financial literacy course, and most colleges don’t either. That leaves financial literacy up to parents to educate their children, individuals to learn on their own, or education through a trusted source. Here are some ideas to help individuals pursue financial freedom:
Bring financial literacy to work. When employees are invited to attend workplace classes on budgeting, saving, and investing, they are more likely to save for retirement and not live beyond their means. These classes are commonly conducted by the financial professional that oversees the company retirement plan, the HR Department, and other financial literacy educators.
Require a financial literacy class to graduate from high school. 21 states now require a financial literacy class to graduate from high school (2020 survey). Financial literacy experts know that teaching people how to manage their income and expenses and giving them a basic understanding of financial concepts will enable them to have financial successes regardless of their future income.
Credit scores improve after a financial literacy class. Having trained teachers that know financial literacy content can help develop better credit behaviors early, even in childhood if offered through the school system. This leads to making on-time payments and understanding how to manage debt and credit.
Who can help if you have questions about financial concepts?
- A capable educator or financial literacy teacher
- Securities licensed Financial Advisor
- A Certified Public Accountant (CPA)
Financial illiteracy affects all ages and all socioeconomic levels. It’s up to all of us to improve financial literacy and help others move away from being debt-ridden toward financial freedom.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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