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7 Expert Perspectives on Why Financial Literacy Is Important
Why is financial literacy important?
Financial literacy is important because it equips us with the knowledge and skills we need to manage money effectively. Without it, our financial decisions and the actions we take—or don’t take—lack a solid foundation for success. And this can have dire consequences:
- Nearly half of Americans don’t expect to have enough money to retire comfortably.
- Credit card debt has reached its highest point ever.
- Forty percent of Americans can’t afford a $400 emergency expense.
Given the above statistics, it might not be surprising that nearly two-thirds of Americans can’t pass a basic test of financial literacy.
To explore the importance of financial literacy, we turned to personal finance experts working in colleges, high schools, and credit unions. Together, the populations they serve span a broad range of ages, incomes, and backgrounds. These educators witness first-hand the impact that financial literacy—or the lack of financial literacy—can have on a person’s life.
We posed the same question to each of them: “Why is financial literacy important?” Here’s what they had to say.
Expert perspectives on why financial literacy is important
“For college students, financial literacy is important because the formula for college success today only has two factors: grades and money. Professors and instructors thoroughly educate students on academic requirements and grading policies. It’s often new financial responsibilities and realities that campuses are not adequately educating or preparing students for success. Research has even shown that students are more likely to drop out of school because of “outside pressures” than poor grades. Student success is no longer constrained to classrooms or defined by academic performance alone. The future success of our students relies on providing opportunities for them to learn, develop, and strengthen core life skills they need today and more importantly tomorrow as successful graduates. Our team is proud to be creating a new paradigm within higher education by bringing the topic of money out of the shadows. We have become national leaders in our field by confirming that personal financial education services are no longer an exception for today’s students—they are an expectation.”
Paul Goebel, Director, Student Money Management Center at the University of North Texas
“I think if people truly understand the way that financial systems work at an early age, or even later on in life—if they’ve made poor decisions but learn how they can go back and fix them and start planning for the future—they can then encompass that and take the steps to make a better life for themselves.”
Cherry Dale, Director of Financial Education, Virginia Credit Union
“Finances inherently—whether or not it’s incredibly short-term in just buying lunch for that day or long-term saving for retirement—help you accomplish whatever your goals are. And financial literacy is important because if you learn about it, it’s going to teach you how to be efficient with your finances in such a way that you can accomplish more goals, and the goals that you do have, faster.
“Financial literacy, for me, the most personal debt I have…between my wife and I we paid off $110,000 of debt in five years, because we just learned how to organize our finances in such a way that allowed us to do that. You know, we don’t make a ton of money, but by learning the process and learning what you can do to better organize your life through financial literacy, you can accomplish things a heck of a lot faster and more efficiently.”
Phil Schuman, Director, MoneySmarts Program at Indiana University
“Financial literacy is important because it’s pretty much one of the things that will encompass just about every aspect of a person’s life. So even in families, even in marriages, lots of the hard times that people will have are gonna revolve around money. In the system that we live in, everything revolves around money. We’re in a capitalist society, so it’s to everybody’s benefit to know as much as they can about being wise about their money so that they can at least give themselves some type of stability in the future.”
Dameion Lovett, Campus Director and Overseer, Financial Education Program at the University of South Florida
“Financial literacy is important because it allows an individual to understand and maximize whatever level of income they earn. It helps people transform their lives. That’s why we do it, and that’s why it’s important.”
Latoya Goree, Director, Office of Financial Literacy at UMKC
“My hope is that with increased financial capability, more of us will be able to transition from surviving to thriving. Resulting in sufficient resources to support our own ever-changing, highly subjective pursuit of ‘happiness’.”
Travis Cook, Education Specialist, Utah State Board of Education
“Financial literacy is important because understanding your finances seeps into every area of your life, whether you think it’s going to or not. If you bury your head in the sand and don’t understand what’s happening in your financial world, or you don’t ask the right questions, you can be at a severe disadvantage to attain financial success.”
Laura Zamborsky, Coordinator, $avvy $eawolf Program at the University of Alaska Anchorage