The Importance of Financial Literacy: Why You Can't Afford to Ignore It, and What Nuvision is Doing to Help

In an era of mounting debt and economic uncertainties, understanding the complexities of personal finance is not just a skill; it's a necessity. The numbers are alarming: as of the second quarter of 2023, total household debt increased by $16 billion, reaching a staggering $17.06 trillion. Even among the affluent, financial instability is more common than one might think, with 64% of adults in the United States, including over four in ten high-income earners, living paycheck to paycheck. These statistics indicate a troubling trend, much of which can be linked back to a lack of financial literacy, even among those with ample incomes.

Why is Financial Literacy Important?

Financial wellness means managing your money to meet your immediate and future needs. It involves things like having an emergency fund, reducing debt, and thoughtful investing for retirement. Financial literacy is essentially the foundation on which financial wellness is built.

According to a recent Forbes survey, the level of concern about financial security remains consistently high, hovering above 75%. Even more alarming is that about 80% of Americans say they are concerned about their family's emergency savings. With numbers like these showing so many people struggling with basic finances, the need for financial literacy becomes even more critical, especially for the next generation.

The Dangers of Financial Illiteracy

It's unfortunate, but most schools and even many colleges fail to teach even the most basic of financial principles to their students.

• 64% of American adults report that money is a significant stressor in their life.
• According to Forbes, only 24% of millennials in the US say they understand basic financial principles.
• 75% of American teens lack confidence in their knowledge of personal finance.
• 41% of teens don't know what a 401(k) is, and 32% don't know the difference between a credit card and a debit card.

The lack of financial literacy training can set kids on a dangerous path, creating a cycle of debt and poor money management that is hard to break. Without proper financial education, people are more likely to make less-than-optimal money decisions that will significantly affect their economic stability and well-being in the future.

Tips for Achieving Financial Wellness

Start Early

The sooner financial education begins, the better. Young adults who are educated about the importance of saving, budgeting, and investing are more likely to make financially responsible decisions as they enter adulthood.

Create a Budget

A well-planned budget is the foundation of financial wellness. It enables you to track your income and expenses, giving you a clearer picture of where your money is going each month. This visibility is vital for effective financial planning.

Build an Emergency Fund

As the Forbes Survey found, 24% of Americans had no money set aside for emergencies. An emergency fund should ideally contain at least three to six months' worth of living expenses. This kind of savings account can be invaluable during unexpected financial setbacks like a job loss or other hits to your income.

Eliminate Debt

Debt is often the most significant hurdle to achieving financial wellness. Interest payments can consume a large chunk of your income, leaving little room for saving or investing. Part of financial wellness is paying off high-interest debts as quickly as possible to achieve financial freedom.

Invest for the Future

Financial wellness also includes planning for the long term, which is where investment comes into play. Investing in assets that provide a reasonable rate of return can lead to financial stability and even wealth creation over time.

Financial Literacy for the Next Generation

Recent financial literacy statistics from Forbes show that 80% of American teenagers lack a savings account. This is a concerning trend, especially given that research indicates children who have savings accounts are four times as likely to invest in stocks and six times more likely to pursue higher education. The next generation must be well-equipped with the tools and knowledge to manage their financial lives.

At Nuvision Credit Union, we recognize the importance of financial literacy and are committed to empowering our members and the community through various educational programs. On September 7th, we have an Economic Forecast Webinar Series featuring Dr. Thornberg of Beacon Economics. An expert in economic and revenue forecasting, Dr. Thornberg will answer your questions and share his insights into the economic landscape of 2023. This event is designed to provide a comprehensive understanding of the economy, equipping you with the knowledge to make informed financial decisions.

On September 21st, we're excited to return to Lakewood High School to conduct another Financial Literacy event for students of Lakewood High School. The curriculum will cover important financial topics like budget creation and setting savings goals for the short, mid, and long term. We'll also introduce the concept of a 'Financial Independence Number,' helping these young adults set a target for their own financial success.

At the end of the month, on September 30th, we'll partner with Junior Achievement of Alaska for the Beyond High School Resource Fair. This event will provide valuable resources and guidance to help young people understand their options and pathways beyond high school, including higher education, vocational training, and career opportunities.

Through these programs, Nuvision is trying to raise the bar of financial literacy and wellness in our community. We firmly believe that educated decisions today will lead to a more financially secure tomorrow for our members. We invite you to take advantage of our Economic Forecast Webinar Series on September 7th.