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Why Financial Literacy is so Important to Me

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financial literacy

I know I’ve said it before, but I love my kids! I know it may sound dopey and over the top, but I would do anything for them. There’s very little I could not envision doing for those little stinkers you see above.

‘I thought this was a post about financial literacy?’ you ask. Well it is. Let me explain…

We’re a Society Built on Debt

 

Not to get all Dave Ramsey, but I HATE debt. I know there can be times in which you can wisely leverage debt to better your overall financial position, but those opportunities can be few and far between.

What I’m talking about is consumer debt. Whether it be spending like crazy on credit cards or taking out crazy long car loans we’re a society that is comfortable with debt. I don’t know where I’ve read it in the past, but it’s what I like to call the payment mentality. Essentially, it boils down to not batting an eye when it comes to taking on more debt. I’ve shared it in the past, but the sponsors of Financial Literacy Month (which starts tomorrow by the way) share two crazy numbers:

  • We carry more than $2 Trillion in consumer debt in America
  • At least 30% of Americans have no extra cash at the end of the month

Taken in light of the fact that retirement account balances, on average, are so minimal it’s clear that priorities are just a tad off to say the least. Back to the point of the post, I care because for many it doesn’t have to be that way.

Financial Literacy is not all Education

 

I’ve mentioned before how vital it is that we have more financial literacy education in schools. This doesn’t have to be “advanced” education by any means, but basics in dealing with debt, balancing a checkbook, basic investing and so forth. I know you can debate whether or not this should go on in the home or at school, but I say why not both? 🙂

Anyhow, education is only going to go so far. The other major component of improving financial literacy is dealing with the behavior issue. Working in the advertising industry, we see this all the time, but we live in a ‘spend now’ culture. Companies spend all sorts of money convincing us that we need a given item or product and do a great job at convincing us that we can’t live life without it.

Once that behavior begins to be stoked, the lack of financial literacy education comes in and enflames it to a worsening state of bad financial decisions. I know that is a large reason why I racked up credit card debt and I’m confident it’s the reason others make unwise financial decisions – because they know no better and their behavior is not held in check.

As I look at our children, I’m not naïve enough to believe that they’ll never make mistakes in their lives. In fact, I know they will. However, if we help model and shape their behavior I believe that those mistakes, at least the financial ones, will be mitigated, allowing them to find ways to make their money work for them as opposed to being enslaved to it in a never-ending cycle of increased debt.

This is easier said than done, of course, but I believe we can encourage financial literacy by living it out before them and giving them a hands on experience with finances as they grow. A large part of this comes through not making money a taboo topic, like my friend Shannon at The Heavy Purse says, but making it something your children are a part of. So, over time, they become more comfortable with it.

It’s My Responsibility

 

Ultimately, why financial literacy is so important to me is that it’s my responsibility. I’ve spoken before about teaching kids about money and it’s a responsibility that I don’t take lightly. As I look at my responsibilities as a father I see the following (and not necessarily meant to be all inclusive):

  • Love on them
  • Provide them food and shelter
  • Protect them
  • Put their needs ahead of my own

As I look at that list, and knowing there are many others that could belong on it, I see teaching them to become financially literate as being right up there. Why, you ask? It’s quite simple really – I need money to do all but the first one. If my wife and I don’t manage our finances the way we should then how can we do these things and more for them? We can’t.

Simply put, financial literacy is so important to me because I want a better future for them. Better than what I came up with and not saddled by the burden of debt, but living the life they want because they’ve been wise in their financial decision making.

 

Why is financial literacy important to you? At what point does it become a behavioral issue as opposed to an education issue, in your opinion? Oh, and just for fun, what caption would you give to the above picture?

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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.