The importance of financial literacy

Income inequality around the world has quickly become a very contentious and combative debate. In America alone, nearly 50% of all Americans do not have enough money to pay for a $500 emergency expense. Uncertainties surrounding economic recessions, COVID-19, trade-wars, and technological automation have made prior career choices obsolete in certain segments of the country. Likewise, millions of Americans are struggling with crippling student loan debt that is harming their overall ability to purchase assets or even save for retirements. Each of these trends are exacerbating only larger government debts, strained pension systems, and a social security system that threatens to become involvement (Braunstein, 2002)

To combat these issues, it is critical to create a much more comprehensive and robust financial literacy program early in a child’s education. Here, it is critical to establish a culture of awareness related to money and how to have a proper relationship with it. As noted above, too many Americans have succumb to financial pitfalls such as high student loan debt, high credit card debt, low savings rates and much more. A proper financial literacy program will better prepare students against the perils of “easy money” that is accompanied by a societal pressure of consumerism. Simply concepts such as compound interest, stocks, bonds, insurance, and other financial concepts will prove invaluable in alleviating of the financial hardships society currently faces.

To begin, financial literacy is paramount to individual student success and must be taught early in a child’s life. For one, this helps to establish a pattern of consistency within students as they look to adopt many of the practices they learn in school. By starting early, financial literacy courses also reinforce positive behaviors that can last a lifetime for students. In addition, a financial literacy course allows students to take advantage of the most important elements of wealth creation, which is time. Learning these critical elements allows students the time to make mistakes that are not very costly in terms of their investment decisions and their overall though processes. Through programs such as Think or Swim and other “paper money” accounts, students can learn early on about the financial markets. These teachings can then be reinforced through classroom instruction, to better enhance overall understanding. Not only is this instruction method much more productive, but it also has the potential to help save children from large financial losses in future years when they become adults (Redmund, 2010).

In addition, financial literacy courses are investment in the future of society. As noted above, the average American is under enormous financial stress as it relates to savings, debt, retirement, and other core elements. By investing now in the future, many of these elements can be eliminated or otherwise mitigated over time. Students can for example, learn the value of savings, learn the value of investment, understand how inflation decreases purchasing power and so forth. These lessons can then be applied to real life circumstances such as the desire to take on student debt, or the desire to use a credit card for projects the individual can’t afford. Through making better informed decisions, society can improve overall through a reduction in large debt balances, increases in savings rates, and an ability to invest more frequently (Ayres, 2006).