Investopedia: Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. The lack of financial literacy can lead to a number of pitfalls. Financially illiterate individuals may be more likely to accumulate unsustainable debt burdens, for example, either through poor spending decisions or through a lack of long-term preparation. This in turn can lead to poor credit, bankruptcy, housing foreclosure, or other negative consequences.
Wikipedia: According to a Sports Illustrated article, an estimated 60% of National Basketball Association (NBA) players, 78% NFL players, and a large percentage of Major League Baseball (MLB) players go bankrupt within five years after leaving their sport.
News Article: 70 percent of people who win a lottery or get a big windfall actually end up broke in a few years, according to the National Endowment for Financial Education. “People who were little, ordinary people all of a sudden become extraordinary,” said Steve Lewit, CEO of Wealth Financial Group in Chicago. “They’re euphoric. They lose all sense of reality. They think they’re invincible and powerful. They think they’re Superman.”
Obviously, unlike most of us want to believe, many of our financial problems wouldn’t necessarily be solved by an abundance of money. As the facts above attest, 7 out of 10 ordinary folks that come into extraordinary quantities of cash, somehow end up losing it all within a few years. The need for financial literacy is not reserved for lottery winners or professional sports figures. One ubiquitous example is the typical college bound student.
Education Data: Student loan debt is now the second-highest consumer debt category totaling some $1.68 trillion and growing over 6 times faster than the nation’s economy. 44.7 million student borrowers are in debt by an average of $37,584 each. Among adults with student loan debt, 93% report borrowing to pay for their own education while 81% report borrowing to pay for a child’s or grandchild’s education.
Such debt is not without consequence: 52% of students who had taken on student loan debt did not feel it was worth it. 53% of millennials have not bought a home because student loan debt either disqualified them or made it impossible to afford a mortgage. 30% of college students lived at or below the poverty line.
FiveThirtyEight: Many graduating students fell easy prey to Institutional Dishonesty. Colleges and universities have financial incentives to enroll as many students as possible, and little incentive — or at least, little direct financial incentive — to ensure that those students will graduate on time and find jobs that pay well enough to repay their loans.
Opploans: Financial literacy is important because it equips us with the knowledge and skills we need to manage money effectively. Without it, our financial decisions and the actions we take—or don’t take—lack a solid foundation for success. And this can have dire consequences:
- Nearly half of Americans don’t expect to have enough money to retire comfortably.
- Credit card debt has reached its highest point ever.
- Forty percent of Americans can’t afford a $400 emergency expense.
CNBC: Research shows that kids who learn to manage money when they are young will be able to better handle their finances as adults. It seems like schools are finally catching on. Forty-five states now include personal finance education in their curriculum standards for kindergarten through 12 grades.
The National Endowment for Financial Education (NEFE) champions effective financial education. PBS list of organizations National Organizations that Support Financial Education. Jump $tart Coalition for Personal Financial Literacy consists of more than 100 national organizations and 51 affiliated state coalitions that share a commitment to advancing youth financial literacy. Learn more. Donate here.