We hear this term a lot these days. In general, most people are fairly “educated”. In the US a person can get a free education till the 12th grade, which in most states you have till your 21st birthday, to complete. Which is fair. Beyond that age… Well that’s a different topic all together.
MOST people are “literate” when they leave school, in general, or at least we hope so.
But school does not make us financially literate, not even a little. I thought school was supposed to prepare us for the real world. Yet it does not teach us ANYTHING about real adulting.
Did they teach you how to balance a checkbook in math class? NO! Yet they told us we needed algebra! Understanding how a mortgage works or carrying a large balance on a credit card, or what compound interest is, would have been helpful back in those early days, instead of finding out the hard way. That’s how most of us start to figure things out.
Not to mention how much simpler life was before the internet and you could not see how “great” everyone else’s life “IS” or appears to be. Banks did not just say, hey you make $50,000 a year, you DESERVE this $500,000 house, and we are going to give you the money for it, even though you only have $15,000 (aka 3%) to put down.
What always drove me crazy about this “low down payment’ thing, is HOW will you afford the monthly payments, IF you could barely save the down payment? Then the banks started making people pay PMI. Which was such a joke, because they made YOU the buyer insure your own loan in case you defaulted. NO risk for the banks. People were getting mortgages that had NO idea what they were signing up for. The bank or mortgage company is NOT the one that should tell you how much you can afford for a house, this is something WE should know/decide, as it’s different for everyone. But most people just go with “the bank said we qualify for more than we asked for!” Let’s get the bigger house! After all the bank said we could! The bank is running a business, they don’t care about you. No, they don’t teach us this in school either.
Same deal with credit cards. You get close to your max on a credit card, and you make at least your min. payment, They UP your limit. They want you to carry a balance, it’s good for their business.
These basic things are not taught in school, they are not discussed in most homes, well unless you are wealthy. The wealthy people DO talk to their kids about money, so they grow up in most cases knowing more than the rest of us. And those are just the basic things, never mind that scary word… “investing”! Rich people stuff, right?
The average midclass person looks at investing like it’s a form of gambling. Again, not the wealthy people, that is how they got wealthy!
When it comes down to it most people ARE NOT financially literate, and we need to change that.
Check out these stats from Moneyzine in the attached article.
US Financial Literacy Statistics 2024: Key Demographics & Cost (moneyzine.com)
Our kids deserve to be educated and make better decisions early on in life vs learning the hard way which ends up wasting so much money that they will work so hard for. There are many ways to get a better understanding about how money works these days. We have the internet, books, podcast….
As adults we have the power to be more educated about money, so we can make it less tabu for our kids. If the kids are of high school age or older, hey you can do it together! Be honest and upfront and tell them, we are going to learn together! 😊 You got this! Dig in, one topic at a time that you want to know more about. You might find you dig the subject! 😊
two chicks talking money. 