COVID-19 has presented everyone with incredible challenges as it has wreaked havoc on our country and the world. While most of us were scrambling to figure out what just hit us, April came and went, along with the Financial Literacy Month.
While Congress has pushed through over $3 trillion in stimulus packages (with the possibility of another $3 trillion being weighed out), we are still faced with financial distress – 40MM+ jobs are still lost, bills are still being generated and retirement accounts are still being raided to stay afloat.
As areas like Los Angeles, where I reside, and the rest of the country starts to re-open, and before we find some semblence of our pre-covid lives, we should take this time to acknowledge the golden opportunity at hand to press reset and re-acquaint ourselves with healthy habits, including personal finances.
Let’s take a minute to revisit ‘Resolution 316,’ the original bill that was passed by the Senate back in 2004 officially declaring April as National Financial Literacy Month. The charge was led by Senator Daniel Akaka (Democrat from Hawaii) and the bill was intended to raise public awareness about the importance of financial education regardless of age, race and socio-economic background. But if you dig deeper into the history of this worthy cause, it dates back to early 2000, when The National Endowment For Financial Education introduced a program for the youth to get an early start. And since the movement was turned over to Jumpstart Coalition, the Youth Financial Literacy Day turned into Financial Literacy Month.
What has the last couple of months taught you about diversification or risk tolerance or the importance of an emergency account? Do you think most of your acquaintances keep a household budget and save for retirement? Do you understand compound interest? Or know what the S&P 500 is? Is gold worth its own weight? Why getting a refund from the IRS is nothing to celebrate about?
The silver lining is that we at least seem frank about our financial shortcomings: In the U.S., only one out of three individuals can correctly answer a basic five question finanical literacy quiz on personal finance.
By understanding how to better manage money and make the most of limited resources, many Americans can improve their personal finances. Where did you learn about personal finance – and do you keep trying to learn more?
There are personal finance books and the web offers a wealth of information on finance – but when you don’t understand what you’re dealing with, you’re unlikely to take action on this information on your own. Professor Robert Merton said it best in an article that he wrote for the Harvard Business Review in 2004 – The Crisis in Retirement Planning – “dump a pile of car parts and a technical manual in the buyer’s driveway with a note that says, here’s what you need to put the car together. If it doesn’t work, that’s your problem.” If this doesn’t work for your car, it certainly doesn’t work for your finances. Don’t go at it alone. Reach out to your financial planner to brainstorm a plan to start you off on the right direction.
It is not too late to celebrate and recognize Financial Literacy Month. Let’s all take the first step by committing to learn one new financial topic per month, improve our overall knowledge and practice good habits.