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From the Bureau: Are you, your kids, financially literate?
What it means, how to acquire it
By Bobby Hansen, - Better Business Bureau
Apr. 7, 2024 5:00 am
Check your financial literacy during National Financial Literacy Month
April is National Financial Literacy Month, a time for young people and adults to focus on their financial future and well-being.
More than 3 million U.S. high school students will graduate this spring, and while they may be well-versed in math, English and science, many are often ill-equipped with knowledge about finances.
Initially promoted as Financial Literacy for Youth Month, the awareness initiative transformed in 2000 to National Financial Literacy Month to be more inclusive and encourage financial literacy skills to U.S. consumers of all ages.
Financial literacy is a broad topic and covers multiple aspects that contribute to positive financial well-being. According to the Consumer Financial Protection Bureau, financial well-being is best defined as:
- The ability to meet all financial needs today and over time.
- Feeling secure in your financial future.
- Having the ability to absorb a financial shock.
- Having the financial freedom to make choices and enjoy life.
A high financial literacy level can best be described as confidence in understanding financial concepts, including saving, investing, debt and other elements that lead to an overall sense of financial well-being and self-trust.
The best way to begin and maintain positive financial habits is to create and follow a budget.
Research conducted in 2021 by The Harris Poll, on behalf of the National Foundation for Credit Counseling and Wells Fargo, found that less than half of the general population — 44 percent — has a budget and tracks how much they spend on food, housing and entertainment.
Scam awareness
A Better Business Bureau report titled “Exposed to Scams” found that consumers with low financial literacy levels are more likely to lose money when engaging with a fraudulent business.
While the tactics of scammers and con artists are constantly evolving to overcome programs and systems focused on preventing their impact on the marketplace, individual efforts by consumers to increase their financial literacy are often the deciding factors on whether a victim loses money to the schemes of a con artist.
Some tips
In recognition of National Financial Literacy Month and to assist consumers in increasing their financial literacy, consider the following tips:
- Guard personal information. In today’s digital world, protecting information goes beyond shredding sensitive documents. While collecting, storing and disposing of sensitive documents helps in preventing identity theft, consumers also must evaluate their digital footprint. Consider multifactor authentication systems on sensitive accounts and properly dispose of electronic devices to prevent accessing of stored data.
- Create and stick to a budget. Following an organized budget can pay dividends in the longevity of financial well-being. For younger people, practicing budgeting can increase confidence, self-belief and independence. Parents can help establish healthy habits by setting up a regular allowance or budget the youth will receive and by discussing their expected expenses.
- Understand the dangers of debt. It may be tempting to purchase the latest product using a credit card or payment plan, but debt can quickly spiral out of control. Always understand the terms of any loans, credit cards or deferred payment options. Determine debt-to-income ratio by adding monthly debt payments and dividing by gross monthly income.
- Check credit history. How money and bills are handled in the past helps lenders decide to do business with an individual. Credit history also helps determine interest rates. Landlords, lenders, insurance companies and potential employers also may look at your credit history.
Bobby Hansen is regional director for the Better Business Bureau Cedar Rapids office. Comments: (319) 365-1190; info@dm.bbb.org.
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