All our financial difficulties start with our lack of financial literacy. There are many pitfalls that could have been avoided if we only got money lessons as kids. It certainly would have turned out differently for a lot of us. The Great Recession would not have been so destructive. It should not have caused us a lot of problems and lifestyle downgrades.
According to an article published in April 2014, only 40% of adults are budgeting and tracking their finances. 75% of Americans are also living from paycheck to paycheck. In most cases, people who are living this way are one emergency away from a financial crisis. Not only that, around 25% of Americans do not have any savings at all.
The article mentioned that one of the ways to improve these statistics is to teach Americans proper financial management. More than ever, this is the time for us to try and improve the habits that are leading us towards a financial catastrophe. Now is the time for us to start learning our financial lessons.
But as we are starting to learn the money lessons that will help us keep history from repeating itself, we have to keep our eyes on the financial literacy of our youth too.
Young Americans rank low in the knowledge of financial concepts
According to an international survey done by the Organisation for Economic Co-Operation and Development or OECD, the United States is not among the top ranking countries with the best financial literacy levels.
In an article published on GWU.edu, it is explained that a study was done on students in 18 different countries. The goal of the study is to determine the ability of students to assess financial data and to use the most basic financial concepts in problem solving. This study is titled “Students and Money-Financial Literacy Skills for the 21st Century.” Among the factors analyzed were the location and social, educational and economic factors that can affect the performance of students.
The results for the participants from the United States does not give us much confidence. With the total mean of 500, the US got a mean score of 492. Not only that, only 9% of the students from America showed high proficiency in financial literacy. Compared to the top score of China with 43% highly proficient students, our results pale in comparison.
Of all the US participants, 80% of them could not even properly analyze the most basic invoice. This puts the country in a very embarrassing position when it comes to knowledge in personal finances. This gives rise to the need for some serious reform in the educational system – especially when it comes to financial lessons.
According to the article published in the website of the George Washington University, the math curriculum is still focused on trigonometry – which is quite useful in measuring fields. But that is no longer the main need today. It is probability and statistics that needs to be the focus of the curriculum today.
The importance for young people to learn financial literacy stems from the need to be successful, retire comfortably, avoid poverty and to take care of their future needs and that of their families. All of these will be affected if we do not teach the right financial lessons to the children.
Importance of having financially literate students
The best way to find financial responsibility is to start them young. That is what we really need to concentrate on. It is best to teach them how to avoid the mistakes of the elders so they do not have to waste their future trying to solve the mistakes of the past. They can always keep on looking forward because they had the knowledge to make all the right decisions in the past.
Not only that, these are the reasons why we need to invest in financially literate students.
They are more inclined to learn.
They are students after all. They do not have to worry about money just yet because their parents are still providing for their needs. That means they can concentrate on learning without being burdened by the need to implement the concepts immediately. What they can do is to practice and if they make a mistake, it is okay. The stakes are not as high as compared to parents making financial mistakes.
They are the future leaders of the country.
Another reason why we should teach financial literacy to students is because someday, they will be running this country. They are the future of the nation and if we want them to succeed, we need to instill in them the values and habits that will keep them from the mistakes that their elders made.
They can make better choices about their college finances.
Student loans continue to be a cause for concern nowadays. New graduates are entering the workforce with so much debt problems. We need to do something about this by making sure that middle and high school students are taught how to properly manage college finances. The thing is, college education is very important but it does not have to end up in debt. There are ways to get higher education that does not involve debt.
They can prepare for their future early on.
When young adult start saving for their future, it is always a sign of wise financial management. If you get them to start even earlier than that, it solidifies a comfortable retirement for them. They can start by making sure they will not end up in student debt. By doing so, they can maximize their earning potential and they can invest it immediately. These effects can happen early if only students learn how to manage their money right from the start.
How to improve the youth’s knowledge of personal finances
Improving the financial literacy level of Americans will not happen overnight. It might not even happen to this generation. But if we do not act now, it is very possible that we prolong the financial agony that we are experiencing right now.
There are two important changes that we need to do right now.
Involve the parents
Let us start at home. Parents should realize that their role in shaping their children’s future is more important than ever. An article from MoneyCrashers.com revealed that the most effective way to teach children about proper money management is by example. Whether parents are conscious of it or not, their children will be using them as a pattern for their own habits.
Integrate updated financial lessons in the academic curriculum
The second change that we need to have to improve the financial literacy of the youth today is to incorporate the right financial lessons in the academic curriculum. A lot of experts and education activists have been calling for a reform in the educational system. We cannot keep on following what was done in the past because the changes of technology is just too fast for us to keep up with. Technology is playing an important role in changing our lives and that has to be taken into consideration. Sadly, we are too slow to make the necessary adjustments to keep pace with the changes that our society is going through. That includes money management. Graduates are getting out into the world without knowing how to manage their money. That puts them at a great disadvantage.
That being said, it is a must that we become united in helping the youth get the right financial literacy that will equip them in the future.