Jean Chatzky
Do one thing: Want to brush up on your financial literacy? Commit to reading (or listening to) one book on personal finance this summer.
What’s Our Financial Literacy Score?
When it comes to financial literacy, many Americans still have a long way to go, according to a new poll from U.S. News & World Report. A survey conducted in April of approximately 1,200 adults found that nearly one third (32%) admit they don’t seek out financial advice at all, with another 45% reporting they check in with family and friends when they have money questions.
Other findings from the study:
- 53% of those surveyed say carrying a credit card balance improves credit scores. (It doesn’t.)
- 39% maxed out their first credit card.
- 48% of respondents couldn’t say what happens to credit scores when you get married.
Financial Knowledge is Power
Why does this matter so much? Because research also shows that those with a higher level of financial literacy tend to do better – they typically earn more, save more for retirement, are more likely to own their own homes – than those who lack financial knowledge.
The good news is, learning to be better with your money doesn’t require a degree in finance or a six-figure income. A great first step is a willingness to learn by seeking out solid information from trusted sources.
That can be tougher than it sounds. Certified financial planner Nick George, owner of ClearMind Capital, says living in a time of infinite financial content can sometimes be a blessing and a curse.
“Most people I work with want to do the right thing but can quickly become overwhelmed by conflicting advice, algorithms, and noise,” he explains. “For example, some may read articles in places like The Wall Street Journal and walk away more anxious than empowered. That’s because those stories tend to focus on what’s outside of our control (market moves, predictions, stock tips).”
George suggests that we would be better served to try and focus more on the things we can control, including spending smartly (on everything from small purchases to big ones like homes and cars), saving enough (and making sure you’re earning the best possible safe return on that money), investing to meet your goals (which means having goals to begin with) and understanding some basics about taxes, credit and your own behavior.
Getting a Handle on Your Finances
If you could use a few more pointers on improving your financial situation, there are some basic things you can do right now to get started.
- Budget or Track Your Money – Start using a budget or at least know how much is coming in and going out every month. You can do this by using a personal finance app (there are many), relying on your credit union’s app or website, or go old school and write out all of your expenses on paper. Some people we know even create their own budgeting spreadsheets. Whichever you decide, knowing where your money is going will help you gain control of your finances.
- Spend Less Than You Make – This sounds simple, of course, in theory, but it can be much harder in practice.The key here is to live below your means so you are able to save money for the future and emergencies. One hack: Save before you spend — and only allow yourself to live on what’s left over.
- Build an Emergency Fund – If you don’t have money set aside in savings already in case of emergencies, start saving a portion from every paycheck and moving it to a separate account. (Pro tip: Ask if your employer will split your paycheck for you.) Make it easy on yourself and automate this process so you can set it and forget it.
- Use Online Calculators – Before making any big financial decisions, it’s a good idea to double check your math and run the numbers on an online calculator. George recommends the calculators at SmartAsset. If you want to figure out how much you need for retirement, AARP also has an excellent online calculator for that purpose.
Books to Boost Financial Literacy
A couple of years ago, I co wrote the book “How to Money: Your Ultimate Visual Guide to the Basics of Finance” to help adolescents, teens and young adults handle everything related to money. It breaks down the basics, including landing your first job, handling your first paycheck, navigating college loans and even getting your first credit card.
There are, of course, many other insightful books on financial literacy. Certified financial planner Samantha Mockford, with Citrine Capital Advisors in San Francisco, shares a few of her personal favorites for those just getting started, including:
- Money Out Loud: All the Financial Stuff that No One Taught Us by Berna Anat
- Broke Millennial by Erin Lowry
- Get a Financial Life by Beth Kobliner
Online Financial Resources
Anyone who has ever helped a child with algebra or geometry homework in the last decade or so is likely familiar with Khan Academy. It’s a great online resource for helping students of all ages. Check out these website links for even more info on building your financial literacy:
- Khan Academy offers a comprehensive, simple, and interactive Financial Literacy class free of charge.
- Khan Academy also has a free Personal Finance course that follows the same format with a short article or video, and some short quizzes that feel like games.
With reporting by Casandra Andrews
Chris O'Shea
