Financial literacy is a vital skill that empowers individuals to make effective decisions about their finances through every stage of life. Starting from a young age, understanding the basics of budgeting, saving, and spending sets the foundation for sound financial practices. From learning the fundamentals in adolescence to managing debt and investments in adulthood and planning for retirement in later years, financial literacy provides the foundation for financial stability and success. A survey by the National Financial Educators Council estimates that poor financial literacy costs the average American $1,506 each year. By understanding and applying key financial principles, individuals can better navigate the complexities of personal finance to achieve their goals, avoid costly mistakes, reduce risks and worry, and secure a bright future.
Childhood and Adolescence: Building a Strong Foundation
For children and teens, now is the right time to start practicing basic financial concepts. Learning money management through piggy banks and allowance systems can solidify concepts like saving, spending, and earning and set your children up for financial success.
At Community Service Credit Union, we’ve partnered with Zogo, available as a mobile app, to provide an interactive learning experience that gamifies financial education. Children and teens can build excitement around finances and learn important financial skills while earning rewards that turn into real rewards. Zogo aims to provide relevant and impactful content to captivate and incentivize kids and teens to improve their financial literacy.
Empowering youth to manage their money with confidence will prepare them to navigate every stage of their financial journey. Children can learn about savings with a piggy bank, from books, or by opening a savings account as they get older. Encouraging kids and teens to set and achieve short-term savings goals helps make finances a regular part of their lives. This can help them build confidence that will ultimately lead to them feeling comfortable making bigger financial decisions in the future.
Young Adulthood: Establishing Financial Independence
With a strong foundation, teens moving into adulthood are prepared for the next stages of financial management. The World Economic Forum reported that for young adults, financial literacy is lacking, with only 50% of adults agreeing that they have some financial literacy. CSCU has partnered with the education platform EverFi to offer financial literacy modules that educate young adults on the essential financial tools they’ll need. This comprehensive learning platform provides video playlists that are customizable so young adults can get the answers they need on a variety of financial topics. With EverFi, young adults can develop a host of skills, from basics like money management to bigger topics like home ownership. EverFi supports young adults and empowers them to:
- Learn to create a budget that tracks income and expenses to properly allocate money for savings, necessities, and discretionary spending. Often simple is better here. By making it easy to track the flow of your money, you increase your odds of sticking to the budget.
- Practice living within a budget and saving for larger expenses like education, vacations, cars, and moving expenses.
- Build credit responsibly using credit cards wisely and paying off balances in full each month. Young adults should learn how credit scores are determined and why they matter, as well as how best to manage them.
- Grow finances by establishing strong financial habits and learning about investment strategies with the future in mind.
Midlife: Growing and Protecting Wealth
Managing your wealth in midlife is all about securing your financial future and getting ready for retirement. During this period, it’s essential to adopt a diversified investment strategy, prioritize debt reduction, and maximize retirement contributions. By doing this, individuals can ensure financial stability and peace of mind as they approach their later years.
- Investing for the future: Diversify and manage your financial risks while exploring investment options through stocks, bonds, and retirement accounts. You can work with a financial advisor to create an investment portfolio that meets your needs.
- Emergency Fund: Improve your financial security by building an emergency fund that covers 3-6 months of living expenses. According to a survey done by Ramsey Solutions, 33% of Americans report having no savings at all, leaving them vulnerable to unexpected challenges like job loss or medical events. A 3-6 month safety net for job loss, healthcare, and other unexpected expenses will set you up to avoid incurring unmanageable credit cards and interest-heavy loans.
- Debt Management: Americans owe $1.03 trillion in credit card debt. There are different strategies for managing and repaying debt, but for many, paying off their highest-interest debt is the top priority. Use tools like debt consolidation if needed and avoid taking on new debts as you shift towards longer-term planning. Reducing debt allows you to focus more resources on saving and investing.
Retirement: Maintaining Financial Health
With the right financial planning, seniors can enjoy a comfortable and worry-free life. Being informed and proactive will secure peace of mind and financial security throughout your retirement years.
- Retirement Planning: Ensure that retirement savings are aligned and sufficient for your desired lifestyle. In 2021, 60% of non-retiree adults said they didn’t think their retirement savings were on track. Use a realistic retirement budget to save while you have income and can focus your energy on long-term retirement goals. Consider meeting with a financial advisor to establish a plan with your personal goals in mind. Reminder: the earlier you start, the better.
- Managing Expenses: Design a retirement budget that reflects upcoming changes to your income and expenses during retirement. You’ll need to consistently monitor your spending to ensure that your savings last.
- Healthcare Planning: Healthcare can be a significant expense in retirement, Fidelity Investments estimated that the average retired couple will spend $315,000 on healthcare-related expenses throughout their retirement. Maintaining health with regular checkups can help you avoid more expensive healthcare needs down the road. Consider long-term care insurance to mitigate unexpected health events.
- Estate Planning: Be sure to keep your estate plan updated to minimize delays and potential tax burdens on your heirs and to ensure that your assets will be distributed according to your exact wishes and intentions.
- Continuous Education: Stay informed about financial trends and keep your financial knowledge up to date using tools like EverFi. Easy to access and understand video modules from EverFi will help you review financial topics and keep you informed on the latest economic trends that could impact your financial goals.
Financial Literacy: An Investment For Your Lifetime
Financial literacy begins in childhood and continues to evolve through every stage of life. By equipping yourself and your children with the knowledge and skills to manage finances effectively, you can feel empowered to make informed decisions, achieve financial goals, and secure your future. With learning platforms and tools like EverFi and Zogo, you can access informative, focused, and unbiased financial lessons and games that make staying on top of your financial future fun and easy.
Pave the way for a more financially secure and prosperous life by staying up to date wherever you are in your financial journey. At CSCU, we offer support by providing the tools and resources you need to bank happy, spend smart, and live well.