Why financial literacy is important
Many students these days don’t understand what financial literacy is. Financial literature pertains to the idea that a student should understand how to manage and control their finances. This is an important concept for college students, especially during the current recession.
Most high schools don’t teach financial literacy courses. Mine did, and I was able to take it in my last year. In it, I learned how to write a check, stay on budget, and understand car and home insurance. This was very helpful for me because before then, I had no idea about insurance or checks, as most students don’t. Math may not be everyone’s forte or you have a hard time understanding it, but it’s important to at least have a basic understanding of how finances work.
It’s so important for students to know financial literacy and learn how to manage their finances for a number of reasons. There are trends in the U.S. that show financial literacy among individuals is declining and only 34% of respondents correctly answered at least four out of five questions posed by the Financial Industry Regulatory Authority. This is not shocking when we consider that most students don’t take a financial literacy course in college unless they’re math majors or going into finance. Add the fact that most high schools don’t offer these courses. As students get older and start having to manage their own finances, create budgets, pay bills and take out loans or insurance, they won’t be able to understand how to go about this.
The impact goes further than just lack of financial literacy. According to Oppu, credit card debt is at an all time high, and most people will not have enough money to retire comfortably. This is a scary thought when you think about the state of things this year. Everyone wants financial stability and not having to work 40 hours a week so they can make ends meet.
Most people would love to pay off their credit card debt with ease, but because a lot of these people never learned financial literacy when they were in school, they have no idea how to properly budget. Some people don’t understand the difference between a credit and debit card.
A credit card gives you a maximum amount of money you’re able to spend in a period of time and then once that period is up, you have to pay it off or your interest will increase, which leaves you having to pay more to balance your credit card out. A debit card takes directly from a checking account and you’re able to manage your own money rather than borrowing it. I can say I only learned this in my last year of high school in my financial algebra class. Otherwise, I’d have no idea how to build credit and safely use cards. It is so important to know how to use these and what the differences are, and taking a financial literacy course will help you understand these ideas. Without understanding these concepts, I fear that people will fall into debt and not be able to get themselves out of it. I also fear that students, as they get older, won’t be able to safely pay their bills because they don’t understand how to manage their finances.
Most colleges offer a financial literacy course for finance majors and most students are able to take them whether or not they are majoring in math or finance. It would be a great idea to take one of these courses, especially if you need help understanding how finances work and especially if you are trying to manage them on your own. It would be a great idea, as well, if you don’t have time to take one of these courses, to research how to understand financial literacy or get a financial advisor that can help you.