Are you financially literate? Here is some help

Christina Ellis

Financial literacy is the possession of skills that allow people to make smart decisions with their money. Although understanding statistics and facts about money is great, no one really understands financial literacy until they can regularly do the right thing with money that leads to the right financial results. Once you have this set of skills, you can understand the big financial issues most people face: emergencies, debts, investments, and more.

Financially savvy people know how to get through a budget, they know how to use the money they run out of, and they know the difference between a 401 (k) plan and a 529 plan. educated consumers:

Budget, emergencies, debt

Budget

Most Americans live from paycheck to paycheck, and this is largely due to the gap between what maths say they can afford and what they actually spend. Financial literacy can make people on regular budgets willing to make savings on their goals and delay the satisfaction of having peace of mind today and in the future.

Emergencies

Only 44% of Americans could cover a $ 1,000 emergency today. About 40% could not cover an $ 400 emergency. People who become financially literate understand the wisdom of saving for those moments in life.

Debt

In addition to mortgages, which amount to nearly $ 9 trillion in national debt, Americans are burdened with car loans, credit cards and student loans. The Federal Reserve Bank of New York reported in 2018 that the total consumer debt in America reached $ 3.95 trillion. To see how this debt burden affects daily life, consider the fact that Northwestern Mutual reported that 40% of Americans spend up to half of their monthly income on debt payments. Much of financial education focuses on understanding how time and money people spend on debt relief is detrimental to their ability to invest in their future.

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