America is consumed with higher education — going to college and earning a degree as the necessary path to a well-paying job. Yet with parents emphasizing the importance of academic excellence, and their children graduating and going on to successful employment, why do many still remain uneducated in fundamental financial matters? Numerous statistics show financial […]
America is consumed with higher education — going to college and earning a degree as the necessary path to a well-paying job.
Yet with parents emphasizing the importance of academic excellence, and their children graduating and going on to successful employment, why do many still remain uneducated in fundamental financial matters?
Numerous statistics show financial illiteracy is a major problem in the U.S., reflected in enormous personal debt, woefully inadequate savings, and irresponsible spending. Despite being home to many millionaires and billionaires, the U.S. ranks only 14th in the world in financial literacy, according to “Financial Literacy Around the World,” a Standard & Poor’s survey.
A lack of knowledge or interest in financial matters comes from the family culture early on, and often as adults, people have to teach themselves. They’re not teaching financial literacy in high school, certainly not even the basics, like how compound interest works.
People need to self-educate and research. All the information is out there. Financial illiteracy is a widespread problem and its consequences reach far, from having no emergency funds to having little set aside for retirement.
The costly effects of financial illiteracy are significantly felt in the following three areas:
Low savings
A 2017 survey of more than 8,000 people by GOBankingRates, a personal-finance website, found that 57 percent had less than $1,000 in their savings account. There’s an overall lack of education there as well from our schools. But at home if you don’t set examples for your children, I don’t think it will ever change. At the end of the day, you’ve got to put a little aside and say to yourself, “I’m not going to touch it.”
Credit-card debt
In December, NerdWallet revealed in its household credit-card debt study that the average American household owes $15,654 in credit-card debt. Forty-one percent in the study admitted to spending more than they should, which leads to paying more interest and experiencing lingering high debt. It’s a lack of discipline and not knowing the effect of interest rates. Most people are well-educated enough to understand what living outside their means actually means. But many adults act like a child making a decision and don’t really think about the consequences until they actually happen. This is especially true with the younger generation. The way the world is progressing with technology makes it easier to buy, and I think people easily get trapped in that.
College debt
Five-figure college-loan debts are common and continue to be a major drag on the economy. Parents of normal to low-income means might want to re-evaluate saddling their child and themselves with such a burden. We can also point the finger at colleges and employers. The colleges are also to blame, because they make it seem as though in order to get a good job, everybody must go to college. There’s nothing wrong with trade school. The cost of college is ridiculous. And I think employers can do a better job of providing a benefits package that would absorb a lot of that college-debt cost for a long-term valuable employee.
People lack financial discipline. They need to stop and think about their needs versus their wants, and about their short-term and long-term goals.
Alexander Joyce is CEO and president of ReJoyce Financial LLC (www.ReJoyceFinancial.com), a full-service retirement-income planning firm, and author of the book: “Rejoyce in Your Retirement.”
