I love reading statistics. If you’ve read any of my previous blog posts or have been on any of my webinars, you’ll notice that there’s always a statistic or two. In fact, there are many statistics about women and money that might surprise you (see related post links). One case study though caught my attention.
Related Post: Women, Aging, and Money
A study from TIAA-CREF showed that those with high financial literacy have double the wealth of people who don’t plan for retirement. However, those with low financial literacy borrow more, have less wealth, and end up paying unnecessary fees for financial products.
If you’re asking yourself “what is financial literacy?” then you’re in the right place at the right time, and this blog post is for you.
Financial Education is Sexy
Some phrases that should be used more often are “financial education” and “financial literacy”. Sometimes, when I’m speaking to a group of women and I start talking about “financial literacy”, I see their eyes glaze over. I get it. It’s not the most sexy topic. However, having enough money to retire comfortably and maintain or improve your quality of life is pretty damn sexy. Having enough money to be able to live debt free and pay for your kids to college so they don’t have to take on mountains of student loans is pretty damn sexy. Going on a vacation with your family is definitely sexy. You get the picture.
Having a financial education means one possesses a set of skills and knowledge necessary to allow them to make informed and effective financial decisions.
What Does It All Mean?
Financial education is important for the average family trying to decide how to balance their budget, buy a home, fund the children’s education and ensure multiple streams of income when they retire.
While financial education is about possessing skills and knowledge necessary to make informed financial decisions, financial literacy goes beyond that.
Financial literacy is all about what you comprehend. What do you understand about the world of money? Sure you know you need a mortgage to buy a house, but do you understand the mortgage loan terms? Do you understand how compound interest works?
Yes you know that you needed to take out a student loan to finish school, but do you know how your student loan works? Do you know what happens if you defer it or how to pay if off early?
Those are things that people with higher financial literacy understand.
If you have a 401(k), do you know which stocks you’re invested in and do you track the stock’s performance? Are you aware of what’s going on in the world around you and how it will affect your economy? Do you know what politicians are supporting and how it will affect the housing market, interest rates, or the stock market?
My Challenge for You
Wherever you are with your financial education, whether you’re a novice, intermediate, or are advanced in your financial education, there’s always something new to learn. So my challenge for you this week is to take a step back, think about where you are in terms of your financial literacy, and pick a topic to learn more about this week. If you want to learn more about paying off debt and how it affects your credit score, then read about it. Learn about it. Increase your financial literacy in that area.
If you have a 401(k) and haven’t paid attention to what stocks you’re invested in, then take a look this week and learn more about those stocks.
Take 5 action steps this week to increase your financial literacy. Some good resources are Ellevest if you want to read more about women and investing. Yahoo Finance for general financial information. Google is also a great research tool. Take your financial education into your own hands and take action this week.
I've Got Your Back
If you are a woman and want to learn the basics in one place without having to search for and filter random information, I created a course called Financial Foundations for Women. In that online course I will educate you on how your mindset and your circle of influence affects the money you make, save and invest. I will teach you how to set attainable goals and how to create an effective conscious spending plan. I’ll also show you how to rapidly pay down debt, including mortgages and student loans. As well as educate you on what you’ll need to retire and how to retire well (even if you’re already in your 40’s with no retirement savings). If you know you need to increase your financial education, I’ve got your back.