ABCs and 123s are vital parts of every child’s early schooling. But when it comes to personal finance, the American education system isn’t making the grade.
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“We are not taught in school, especially at a young age or even through college the financial basics,” says Alexander Joyce, president, and CEO of ReJoyce Financial.
“Financially illiteracy is a widespread problem and its consequences reach far, from having no emergency funds to having a little set aside for retirement.”
Joyce shared the three major ways financial illiteracy is harming our relationship with money:
Joyce says schools and colleges aren’t teaching students the important financial lessons including the value of saving, how to make money grow and what compound interest is. He says this is why so many Americans live paycheck to paycheck and fail to set money aside for emergencies. A survey by Discover found that 35% of people aren’t saving because they don’t know how to go about doing it. Joyce’s advice is to regularly put money aside and simply say to yourself: “I’m not going to touch it.”
Student loan debt
At almost $1.5 trillion dollars, Americans are burdened with more student loan debt than ever. Joyce says parents of normal to low-income individuals should evaluate saddling their child and themselves with such a burden. He also points the finger at colleges and employers. Joyce says colleges make it seem that in order to be successful, you must get a college education. He notes that trade school can be an option. Employers could also absorb some college debt, by improving the education benefits they offer employees.
Credit card debt
Wallethub says Americans now owe more than $1 trillion in credit card debt for the first time in history. The average household owes a record $8,600 - $138 more than at the height of the great recession. Joyce says you don’t have to be rich and famous to be financially literate. Most people are well educated enough to know what living outside of their means actually means. While millions of people have credit cards, he says many of us suffer from irresponsible spending and not understanding the effect of interest rates.
Joyce says while the education system is failing, everyone can improve their knowledge of financial matters through self-education and research. Parents should also do their part at home. When gift giving, avoid buying your child or grandchild the latest toy that will probably end up in the trash in a couple of years. Teach them about investing by matching their personality or interests to a stock. Show them the value of holding an equity long term. He says if parents don’t set positive examples for their children, the situation may never change.
“People lack financial discipline,” says Joyce. “They need to stop and think about their needs vs wants, about their short-term and long-term goals.”
Linda Bell joined FOX Business Network (FBN) in September 2014 as an Assignment Editor. She is an award-winning journalist with more than 20-years’ experience covering business and financial content. You can follow her on Twitter @lindanbell.