Regular readers of this blog know that April is a big deal in personal finance. It’s National Financial Literacy Month (NFLM) and boy, do we need it! It seems the retirement crisis in America is not getting better. Based on a survey by Pensions & Investments, Gen Xers have a savings shortfall for retirement of about $451,000. Boomers are a little better off, but still need another $291,000 for retirement. A study produced annually by Northwestern Mutual, found in their 2023 Planning & Progress Study, that Americans believe they need to save $1.27 million for retirement. Those percentages and averages represent a large number of Americans. And, the median 55- to 64-year-old's 401(k) account balance for 2023 was $71,168 (that’s a decrease from $89,716 for 202), according to Vanguard data (How America Saves, 2023). Note the term median, not average. The average 401(k) balance for 55- to 64-year-old’s is $207,874. It's a bit easier to read your generation’s summarized stats at The Average 401(k) Balance by Age at Bankrate.com. So, what is financial literacy and what can we do to improve ours? Read on to find out. Pay attention to terms and who is reporting what as the numbers can be wide-ranging due to average, median, and age groups.
Financial literacy is much more than comparing yourself to other peoples’ retirement plan averages and national benchmarks. Financial literacy is also much more than knowing the meaning of financial terms and lingo used by the financial press and industry insiders. It’s an overall understanding of money, finances, planning, and your relationship and skill set to all of the above. It’s your understanding of, and relationship and psychology to your money. Read on for more background and pointers to improve your financial literacy. National Financial Literacy Month was launched in 2004. According to Wikipedia, the US Senate passed Resolution 316 to officially recognize April as National Financial Literacy Month with the goal of helping Americans establish and maintain healthy financial habits.
Why is this important? Financial literacy is the bedrock of being able to understand your finances throughout life. Sound financial literacy guides you in making healthy financial decisions, avoiding or mitigating rash decisions, saving money, making money, avoiding scams, and in general, providing you with a sound future. You will use financial literacy throughout your life from daily shopping decisions, to investing for your future, to buying a house or car.
We need NFLM in America. According to Next Gen Personal Finance, only 25 states require a single personal finance course for high school students. A single course! Further, those courses are not created equal. Therein lies the problem. As society’s needs change, and our spending priorities and patterns change, so do the complex financial services and products we rely on. What we learned, or thought we knew, may no longer be valid. What worked for one generation, may not work for the next.
Financial literacy is ever-changing. We all need to know the basics, but too many Americans are not even receiving the basics in school. Learning from our parents may not be any better – especially if no one taught them! This is why we need NFLM and it needs to be an on-going class in our public schools that is offered more than once, and for more than a semester.
I have a NFLM challenge for you, please spread the word. Tell people that April is National Financial Literacy Month. Ask questions and be curious about personal finance. Do you have children? Find out what is being taught in their school system about personal finance. Ask detailed questions about the curriculum and make sure your student is getting solid information. Find out if it’s one class, or several classes over the course of their education. Or worse, incorporated into another course or program. You could also take a course for yourself! A fantastic resource is Choose FI Foundation. ChooseFI has resources for all age levels. If you’re a teacher, try Next Gen Personal Finance for courses and certification.
Do you have questions? Don’t know who to ask? Feel free to ask me! If it’s a really difficult question, we can explore the answer together. Be sure to subscribe to this blog! Contact me and let’s get started. #talktometuesday #education #Hireaplanner #financial #financialliteracy #NationalFinancialLiteracyMonth #NFLM #stressfree #savings #moneyeducation #financialeducation #CFPPro