Financial literacy (or lack thereof) impacts the decisions an average person makes when trying to balance a budget, buy a home, fund children’s education and ensure an income at retirement. Its value reaches beyond that of a bank account – it influences the daily connections a person has with their workplace, home and places of purchase.
Why Financial Literacy Is Especially Important in Today’s Economy
Many consumers have had very little understanding of finances, how credit works and the potential impact on their financial well-being. In the digital age where everything is available with a touch of a screen, online shopping creates ample opportunity for an overextension of credit – a fast track to accumulating debt.
Meanwhile, credit card companies, banks and other financial institutions are inundating consumers with credit opportunities. This gives people – the ability to apply for credit cards or pay off one card with another – and without the proper knowledge or checks and balances, it is easy to get into financial trouble.
In addition to the one-click shopping and opportunity for an excessive credit line, public and corporate policies have also increased the need for financial literacy. Today, pensions are almost a thing of the past. Instead, employees are being offered the ability to participate in 401(k) plans, in which they need to make investment decisions and decide how much to contribute. Those that can’t rely on retirement planning through a 401(k) or pension still needs a level of financial literacy to secure their quality of life. The Social Security Board of Trustees reported that by 2033 the Social Security trust fund may be depleted, a scary prospect for many of those without a 401(k) or pension.
How Financial Literacy Can Improve Your Quality of Life
Lack of financial understanding has been assigned to one of the main causes of stress and lower quality of life, alongside the more tangible downsides of savings and investing problems. Financial literacy is directly linked to:
- Reduced daily stress
- Increased earning potential
- Improved investment decisions for retirement
- Increased education funding for children
- Giving back to the community
Equipping individuals with financial knowledge is the best way to secure their fiscal futures. So, how is this accomplished? Employers can offer adaptive, easy-to-use, educational platforms to their employees as a part of a benefits package. These platforms not only help the employees improve their lifestyle, they have strong ROI through increased work productivity and employee retention.