April is Financial Literacy Month
What is Financial Literacy? In my mind, a person who is financially literate knows what to do with the dollars they have. Financial literacy is not about being rich or poor – it is about making the right financial decisions for your own financial circumstances.
Financial literacy generally implies that one has the knowledge and understanding needed to plan and implement financial decisions. Financial literacy often involves decision-making in certain personal finance areas like real estate, insurance, investing, saving (especially for college), tax planning, and formulating retirement strategies. The Government Accountability Office defines financial literacy as “…the ability to make informed judgments and take effective actions regarding the current and future use and management of money”.
I’m writing this today because someone said to me “Oh, I don’t need to know about money, my parents take care of everything.”
That comment made me wonder about that person’s future goals. Will they get a job? Will they move out on their own and eventually buy a house? Will they have a family of their own? How will they know about interest rates? How will they know to save or invest for retirement?
Everyone uses money and everyone can benefit from learning more about money, even young adults who are supported by their parents or who expect to earn a large income after graduation. Just look at a celebrity like Mike Tyson – who is arguably not very financially literate – he earned an estimated $300 million and then let his fortune slip through his hands. He is now bankrupt. I wonder if he ever said “Oh, I don’t need to know about money….”?