Every year, the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) release the results from their Personal Finance (P-Fin) Index survey. This survey asks 28 questions to measure how well U.S. adults understand basic financial concepts in areas such as earning, consuming, saving, investing, borrowing, and managing risk.
The 2024 results mirror those that have held fast since 2017, which show that 50% of Americans do not understand basic financial principles that underpin sound financial decision-making. This raises some real concerns. People who lack financial literacy are potentially at greater risk of making common money mistakes, such as taking on too much debt, not saving enough, or not building an emergency fund.
A commitment to lifelong financial literacy can help counter these trends. Beyond allowing you to build a healthy relationship with money, remaining financially literate over time can enhance your financial confidence, reduce your vulnerability to fraud, and position you to reach your long-term goals.
What Is Financial Literacy?
At a high level, financial literacy is about understanding key financial concepts and having the ability to put them into practice. This encompasses a wide range of skills, from budgeting, debt management, and making investment decisions aligned with your risk tolerance to saving up for major financial goals such as education, home ownership, and retirement.
Financial literacy can also help you make more informed choices around the frequent financial decisions you will likely need to make throughout your life, such as choosing a credit card, managing student loans, comparing insurance policies, negotiating a car lease, or getting a mortgage.
Staying Financially Literate over Time
Like most educational pursuits, financial literacy isn’t a “once and done” exercise. External factors such as shifting tax rules, economic forces, bull and bear markets, and digital innovation continue to alter the financial landscape. At the same time, personal factors like marriage and divorce, children, aging, or illness can all change the way we relate to and manage money.
This makes it important to maintain financial literacy throughout our lives. Here are some strategies to do just that:
Get Some Training
Whether you’re a beginner or would like to delve deeper into more complex financial concepts, there are countless educational resources available to you:
- College classes: Many colleges offer courses in personal finance that you can enroll in or audit. Look for community colleges or online programs that are both accessible and affordable. Additionally, take some time to research the programs first to make sure they deliver the education you’re looking for.
- Online courses: The internet is a treasure trove of financial education. Websites like Investopedia and platforms like TEDx feature courses and webinars on various financial topics. Wealth Enhancement also regularly publishes articles and insights and hosts educational events and webinars to share knowledge to help you create financial freedom.
- Subscription services: To stay updated on the latest trends and tips, consider subscribing to financial blogs, newsletters, and podcasts, such as the Your Money Radio Show. Regular exposure to financial content can keep you informed and help you stay on track towards your financial goals.
To remain engaged and motivated to learn, take some time to figure out your learning style. Some people prefer in-person classes or workshops, while others thrive in online settings. Consider audio and video resources like podcasts and webinars if you learn better through listening and watching. Try reading online articles as well as physical or e-books to see which you prefer. The trick is to find what works best for you and stick with it.
Put Your Learnings into Practice
As you gain a greater understanding of financial topics, a great way to solidify your financial literacy is by putting your learnings into practice. Some action steps you can take include:
- Creating a budget to track your income and expenses.
- Building an emergency fund by setting aside three to six months’ worth of living expenses to cover unexpected costs without resorting to credit or loans.
- Developing a debt repayment plan that prioritizes paying off high-interest debt first.
- Taking steps to improve your credit score by paying bills on time, keeping credit card balances low, and opening only necessary credit accounts.
- Setting up savings and investing accounts to meet long-term goals, such as retirement.
- Protecting your assets with appropriate insurance coverage.
- Reducing financial burden by prioritizing your own financial wellness.
As you embark on this journey, keep in mind that financial literacy is not something you achieve overnight. Be patient with yourself. Review what you’ve learned regularly and don’t be afraid to revisit complex topics. It’s okay to make mistakes as long as you learn from them.
Ask for Help
Learning new skills is rarely a linear process. Fortunately, you don’t have to go it alone. Consider finding a mentor with financial knowledge who can offer guidance, share experiences, and provide accountability as you work towards your financial goals. An experienced financial advisor can also provide you with personalized advice tailored to your specific situation and help with everything from budgeting to retirement planning.
By continuously educating yourself, making informed decisions, and seeking professional advice, you can gain lifelong financial literacy skills to build a stronger financial future.
Get started today by contacting a Wealth Enhancement advisor.
Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group®. Wealth Enhancement Group is a registered trademark of Wealth Enhancement Group, LLC.
