We observe National Financial Literacy month in April in an effort to highlight the importance of financial literacy. As this occurs, many Americans have an inadequate understanding of the fundamentals of finance. And this lack of knowledge – financial illiteracy – has brought with it dire consequences for many families.
Millions of Americans cannot make the payments on their mortgages. Unfortunately, many lacked the financial capability to service a loan.
Credit card debt is astronomical. The average debt per household is $7,123. Significantly, one-third of consumers make only the minimum payment each month.
One-fourth of households are spending more than they make. Another 36 percent are spending what they make – breaking even.
More than half of U.S. households have no emergency fund to act as a cushion against unexpected financial shocks. And the average savings per household is only $6,000.
A better understanding of finance would help prevent this from happening. Where can one seek financial knowledge? Many government agencies, private firms, and nonprofit organizations offer a wide range of programs. But some of the best are offered by financial regulators.
The Federal Reserve (www.federalreserve.gov) and the Federal Deposit Insurance Corporation (www.fdic.gov) provide an array of programs that attempt to increase consumer access to information about financial products and services. They also have initiatives that promote awareness of the importance of financial literacy and provide for cooperative arrangements with educational and community organizations.
The best approach, however, is to teach young people the basics of finance and economics before they become submerged in debt as adults. Teaching the basics can change financial practices and lead to a more financially literate public.
Surveys indicate more needs to be done in the educational arena. The latest, conducted in 2013, found only 19 states – Alabama is one of them – require a course in personal finance. And just 24 states, including Alabama, require a high school course in economics.
That this country has such a low level of financial literacy is a national disgrace. Not only is literacy crucial for individuals, but it is also vitally important to the nation’s financial system. To have a strong, competitive economy, our citizens must be able to manage their financial lives well.
Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean. He is retired from the board of directors of First United Security Bank. Email him at wccurtis39@gmail.com.
