​Rich or Poor—Why the Lack of Financial Literacy Does Not Discriminate

According to 2017 research by the National Foundation for Credit Counseling (NFCC), only 40% of adults have a budget, and 80% of adults agree they could benefit from advice and answers to everyday financial questions.
Who needs financial education? Is it only important for the poor? Or maybe just for the wealthy? It’s so easy to think that financial literacy is important for this group or that group, but in reality—it’s important for EVERYONE. And in our society, the knowledge gap can be seen in young and old, poor and rich, and male and female.

Here are four reasons why financial education is important for everyone, regardless of their background:

1. Emergency Funds—According to a recent Associated Press survey, two-thirds of Americans would struggle to cover a $1,000 emergency with cash. Even more alarming, 38% of households making more than $100,000 a year, say they would have difficulty coming up with the funds. Just because your income level bumps you to the next tax bracket does not mean you don’t need financial education. Like Dave Ramsey, we recommend you put $1,000 in an Emergency Fund while getting out of debt; when out of debt, build up the Fund to three to six months of expenses.
2. Budgets—Oftentimes, the word budget carries a negative or scarcity connotation. Many even think that a budget is only for the poor or those “pinching pennies.” In reality, a budget is simply a plan to tell your money where to go. Whether you make $1,000/year or $1,000,000/year, it’s easy to let money flow through your fingertips without even knowing where it went. Have you ever made a budget? If your answer is no, join us at the Hoover Public Library this Saturday for Personal Finance 101 and Budgeting (https://www.ecosavingsrace.org/Savings-Race-University.aspx).  
3. Debt—Many people, rich and poor, take on debt without thinking about the consequences. When you borrow money, you typically have to pay it back in a certain time frame WITH INTEREST. We live in such a payment-focused society. It’s easy to think that if you can make your monthly payment that it’s not a big deal. Do you know how much you are paying back when interest is tacked on? Before taking on new debts, it’s important to evaluate how much in total you will have to pay back and if it would be better to put the item on pause and save cash.
4. Goals—Have you set financial goals for yourself of your family? No matter your socioeconomic status, it’s important to think about the future and how to use money as a tool for your benefit. Whether you want to pay off the house early, go on a big vacation, or save for retirement, creating goals can help you keep your eye on the mission, but without education on how to meet your goals, they can seem unattainable. If you need a little extra help tracking your goals, check out this previous blog.

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Now that you know financial literacy is important for everyone, are you ready to improve your financial knowledge? We have a great solution for you! Over the next few months, we will be offering financial education seminars to provide relevant and practical information to our community. Click here to learn more about all of the classes and register. 

Sources:
​National Foundation for Credit Counseling, 2017 Infographics, https://nfcc.org/wp-content/uploads/2017/05/2017-FLS-Infographic.pdf
Associated Press, Poll: Two-thirds of US would struggle to cover $1,000 crisis, http://www.apnorc.org/news-media/Pages/News+Media/Poll-Two-thirds-of-US-would-struggle-to-cover-$1,000-crisis.aspx

Written by: Melissa Stewart

Melissa Stewart is a wife, pup-mom, and the Marketing Director at ēCO Credit Union. In her spare time, she enjoys spending time with family and friends, reading, and hunting for Rae Dunn.