According to credit.com, 80% of Americans carry some significant amount of debt. About half of these individuals can trace their debt to homeownership. However, there are many individuals that carry non-mortgage related debt. Credit.com says only 33% of millennials have a mortgage. The majority of these individuals, aged 21 to 37, have student loan debt, car loans, and credit card debt. Shockingly, credit card debt makes up 39% of the debt these individuals have. That sounds like a crazy amount, but many Americans report that credit card debt makes up a large chunk of their overall debt.
It is quite easy to imagine how an individual could become wrapped up in such considerable credit card debt. Credit is becoming more easily available to individuals of all ages. It seems individuals barely enter adulthood before multiple credit offers are thrown at them. With little knowledge of how credit really works, many individuals just jump right into this confusing hole of debt. When your credit score gets too low, you need to repair your credit so that you don’t lack opportunities for credit in the future.
A Lack of Planning for the Future
Overwhelming debt is not the only problem. CNBC has some surprising facts regarding retirement planning. Northwestern Mutual surveyed 2,003 adults and found some startling statistics. Seventy-eight percent of Americans reported they are quite concerned with their lack of preparedness for retirement. Twenty-one percent reported they have absolutely nothing saved, and another ten percent say they have less than $5,000 saved.
CNBC also shared some facts about emergency savings. Roughly 55 million people, 23% of people surveyed, say they have nothing set aside for emergencies, as noted by bankrate.com. Only 29% of people actually have the recommended 6+ months of savings.
These numbers are shocking. Why do more of us not hold such pertinent knowledge about finances and such decisions? These are definitely things all individuals need to know. Our education system seems to be lacking in this area.
A Lack of Focus on Practical Skills in the U.S. Education System
Our educational system was established centuries ago, with more of a focus on survival and such skills. There have been some shifts to more modern skills like reading, writing, and math skills. However, there have not been sufficient changes in how our nation prepares individuals for the financial aspects of life.
As our world has changed and required people to know more about finances, our education system has not really altered to accommodate this. We teach our children how to memorize and use math formulas and how to understand detailed works of literature – some of these skills are arguably unnecessary for a successful adult life. We completely neglect to prepare our children for the financial aspects of adulthood, which absolutely is necessary for the future.
New Initiatives to Further Financial Prudence
The United States is not the only nation seeing such problems. Canada has surveyed citizens as well and reported similarly startling statistics. Canada has begun an initiative to educate its citizens in financial literacy. This implementation has shown good progress. Since implementation, many Canadians report they are less stressed about their finances. There is still much work to do though. There needs to be a focus on teaching these skills before crippling debt or retirement deadlines start inching closer. It would be ideal to teach these skills before they are necessarily needed.
Would it not be great to set these standards earlier in life and make sure our future generations are prepared before it may become too late or too close to when these skills are really needed? We should teach these skills early so individuals already have such knowledge when it is needed.
Canada has begun implementing this financial knowledge into its schools now as well. Students are beginning to learn about financial literacy in math classes as early as kindergarten. These skills are then evaluated in similar manners as other skills.
Canada has seen great results since implementing these financial skills into the school curriculum. Credit.com reports that teaching these skills does reflect better financial decision-making by students as young as 15 years old. There are various factors that alter the success of these programs – parent involvement being an important one. However, these programs have been quite successful overall.
As we all get older, we realize how important financial knowledge and planning can be. It may not seem like a skill one should learn in school, but if not there then where else? Is it solely a parent’s responsibility to teach these skills? What if the parent is unavailable or does not possess this knowledge themselves? If we wish for future generations to succeed and prosper, we must ensure that they are provided all the essential tools to do so. Financial literacy is most definitely one of these skills – maybe one of the most important.