The vast majority of Americans are unable to process even some of the most basic economic and financial decisions. And often when they do make financial decisions, those decisions will have a negative impact on their finances for years to come. At a time when financial issues are becoming more complex, many Americans do not have even a basic understanding of the economics of finance, saving, investing, debt, and capital. It’s little wonder then that only one third of Americans are saving any of their income* and that the average American family carries $225,000 of debt.**
Financial literacy is an individual’s ability to make informed decisions about even basic economic concepts such as earning, saving, growing, borrowing, lending, giving, and protecting money. By better understanding the forces that affect money, how to manage spending and debt, and the basics of investing and money management, many people can become debt free and substantially increase their savings and financial strength.
Most people know what they know, and they know what they don’t know. But they also don’t know what they don’t know. And it’s what they don’t know that will ultimately keep them from making good financial decisions. Good financial education is teaching people what they don’t know and increasing their financial I.Q.
* The 2014 Consumer Financial Literacy Survey, The National Foundation for Credit Counseling, Harris Poll, 2014.
** GoBankingRates study, 2011.