April is financial literacy month and financial education is a priority to us at Credit Union of Denver. We pride ourselves on providing financial education throughout the community so that we can help contribute to a stronger financial future.
What is Financial Literacy?
Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.
When you are financially literate, you have the essential foundations of a smart relationship with money that will start a lifelong journey of learning about the financial aspects of your life. The earlier you start, the better off you'll be, because education is the key to success when it comes to money.
Dangers of Financial Illiteracy
Given the importance of finance in modern society, lacking financial literacy can be very damaging to an individual’s long-term financial success. Being financially illiterate can lead to many pitfalls, such as being more likely to accumulate unsustainable debt burdens, either through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to poor credit, bankruptcy, housing foreclosure, and other negative consequences.
Did you know...
Only fifty-seven percent of American adults are considered financially literate, according to a survey from credit rating agency Standard & Poor’s (S&P). Plus, Americans lost an average of $1,506 in 2023 due to financial illiteracy, according to the Financial Educators Council.
The Importance of Financial Education
From day-to-day expenses to long-term budget forecasting, financial literacy is crucial for managing these factors. It is important to plan and save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy, defaults, and foreclosures.
Benefits of Financial Literacy
- Prevent devastating financial mistakes.
- Prepare people for emergencies.
- Help individuals reach their financial goals.
- Generates confidence.
Strategies to Improve Financial Literacy Skills:
- Create a budget.
- Track how much money you receive and spend each month. Follow budgeting method like 50/30/20 – 50% of your income to needs, 30% to wants, and 20% to savings.
- Pay yourself first.
- Set aside a certain amount of each paycheck into a savings account before paying any other expenses.
- Pay bills on time.
- Consider setting up automatic payments and/or sign up for payment reminder.
- Check your credit score.
- Monitor your credit with our Credit Score & More feature without impacting your credit score! Plus pull your full credit report yearly.
- Manage debt.
- Develop a debt reduction plan to reduce your spending and increase your repayments.
- Invest in your future.
- Plan for retirement by contributing to your 401k and/or consider opening an IRA.
How to Become Financially Literate
Learn and practice a variety of skills related to budgeting, managing, and paying off debts, and understand credit and investment products. Thankfully, there are resources and education tools for those wishing to teach themselves about the world of money. We offer financial education tools ItsAMoneyThing and Enrich. Go through money topic courses or watch easily digestible videos, we have options for people of all ages. We also cover many important money topics in our blogs.
Financial literacy is a critical skill in today’s world. Beyond financial health, it empowers individuals, reduces stress, and fosters a sense of security. You can improve your financial literacy through self-study, formal education, seeking professional advice, and networking with peers. Try out one of our financial education tools and begin your financial literacy journey today.