By Samantha Rose
For better or worse, money touches all areas of life. Financial literacy can help.
Why is financial literacy important?
Financial literacy is important because it equips us with the knowledge and skills we need to manage money effectively. Without it, our financial decisions and the actions we take—or don’t take—lack a solid foundation for success. And this can have dire consequences:
- Nearly half of Americans don’t expect to have enough money to retire comfortably.
- Credit card debt has reached its highest point ever.
- Forty percent of Americans can’t afford a $400 emergency expense.
Given the above statistics, it might not be surprising that nearly two-thirds of Americans can’t pass a basic test of financial literacy.
To explore the importance of financial literacy, we turned to personal finance experts working in colleges, high schools, and credit unions. Together, the populations they serve span a broad range of ages, incomes, and backgrounds. These educators witness first-hand the impact that financial literacy—or the lack of financial literacy—can have on a person’s life.
We posed the same question to each of them: “Why is financial literacy important?” Here’s what they had to say.
Expert perspectives on why financial literacy is important
“For college students, financial literacy is important because the formula for college success today only has two factors: grades and money. Professors and instructors thoroughly educate students on academic requirements and grading policies. It’s often new financial responsibilities and realities that campuses are not adequately educating or preparing students for success. Research has even shown that students are more likely to drop out of school because of “outside pressures” than poor grades. Student success is no longer constrained to classrooms or defined by academic performance alone. The future success of our students relies on providing opportunities for them to learn, develop, and strengthen core life skills they need today and more importantly tomorrow as successful graduates. Our team is proud to be creating a new paradigm within higher education by bringing the topic of money out of the shadows. We have become national leaders in our field by confirming that personal financial education services are no longer an exception for today’s students—they are an expectation.”
“Finances inherently—whether or not it’s incredibly short-term in just buying lunch for that day or long-term saving for retirement—help you accomplish whatever your goals are. And financial literacy is important because if you learn about it, it’s going to teach you how to be efficient with your finances in such a way that you can accomplish more goals, and the goals that you do have, faster.
Paul Goebel, Director, Student Money Management Center at the University of North Texas
“I think if people truly understand the way that financial systems work at an early age, or even later on in life—if they’ve made poor decisions but learn how they can go back and fix them and start planning for the future—they can then encompass that and take the steps to make a better life for themselves.”
Cherry Dale, Director of Financial Education, Virginia Credit Union
“Financial literacy, for me, the most personal debt I have…between my wife and I we paid off $110,000 of debt in five years, because we just learned how to organize our finances in such a way that allowed us to do that. You know, we don’t make a ton of money, but by learning the process and learning what you can do to better organize your life through financial literacy, you can accomplish things a heck of a lot faster and more efficiently.”
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