The importance of financial education

According to Forbes.com, 75% of Americans live paycheck to paycheck and 25% don’t have any savings built up. Nearly 50% of all Millennials have too much debt which leads them to borrow from greedy lenders. Families that experience economic struggles often don’t have a strong foundation of financial knowledge to utilize when making important decisions with their money. A thorough financial education is crucial to achieving a healthy and stable financial future.

Money management

Households that smartly manage their money are able to meet the daily needs of their family but also have the flexibility to cover any unexpected costs that arise such as medical bills or a school field trip. Understanding how to create and maintain a budget, organize bills, and plan for the future is critical to living a financially sound life.

Long-term goals

Planning for the future isn’t just for millionaires and CEOs. Low-income families often display difficulty in the creation of long-term financial goals because they are so wrapped up in the present, as their thoughts are consumed by how they are going to pay this month’s bills. Sometimes individuals that struggle with money simply “accept” that they will always be in debt and therefore do not make strides to budget, problem solve or dig deep into their finances to examine the roots of their struggles. The art of financial goal-setting is an advantageous, learned skill that can positively affect a family’s financial outlook.

Credit rating

A credit score can be a difficult concept for anyone to grasp. Understanding why your credit matters and how your credit is affected can aid in promoting smart financial decisions. Good credit can affect future financial choices in a positive way but bad credit can prevent a family from making an important purchase. The recognition of how paying bills on time and reducing debt impact a financial record is a key motivator to start making smart choices.

Transferring habits

Parents and guardians with strong financial habits can pass healthy money management practices to the next generation. Parents can teach their children productive savings habits and relate lessons learned so that their children don’t repeat the same mistakes. Children who grow up in a household where healthy financial habits are displayed are more likely to handle their finances well as adults. This sets up future generations for healthy financial lives.

Positive well-being

Financial troubles can lead to stress and unhappiness as guardians attempt to figure out how they are going to put food on the table, keep the lights on, and get out of debt. Anxiety that is related to financial burdens is easily transferable to everyone in the household. Children notice arguments and can feel tension which often manifests in their physical and mental well-being, social relationships and academic performance at school. Taking care of financial responsibilities lets children feel safe and secure, allowing them to focus on being kids.  

Financial responsibility

Effective money management habits start with responsibility. Organizations like Habitat for Humanity strive to help out families in need by not only providing a roof over their head but by helping to instill financial responsibility. For families that demonstrate a need for housing, Habitat for Humanity gives them financial education in addition to a secure place to live. After being accepted into Habitat for Humanity’s program, families take financial courses and begin contributing hours of sweat equity. Homes are sold at fair market value and financed at a 0% mortgage rate for up to 30 years. The homeowners’ mortgage payments are put into a fund to help build more houses for other families in need. Through home ownership, families are able to learn financial responsibility and build financial stability.

 

Financial education can help prepare families for a solid financial future. With a clear, in-depth understanding of their finances, families can lead a healthy and happy life, heading in a purposeful and planned financial direction.