In our society today, there’s a big gap in financial knowledge. Many people struggle with managing money, budgeting, saving, and understanding credit. Unfortunately, the lack of financial education leaves many without the tools they need to make good financial decisions. Let’s take a closer look at why this gap exists and how it affects people every day.
Why Financial Education Matters
Financial literacy is the ability to understand and use various financial skills. This includes managing your budget, understanding debt, saving for emergencies, and planning for retirement. Yet, research shows that many people lack these skills. According to a recent survey from the National Financial Educators Council, people lost an average of $1,819 in 2022 because of their lack of financial knowledge. Imagine the difference that amount could make for families struggling to make ends meet.
Credit scores are another example. Many don’t fully understand how credit works or how to maintain a good credit score. Poor credit can limit someone’s ability to buy a home, get a loan, or even secure a job. Low credit scores can cost people thousands in higher interest rates over their lifetime, and they may feel trapped in a cycle they don’t fully understand.
Why Don’t Schools Teach Financial Education?
For many people, financial education isn’t something they learn in school. A study from Next Gen Personal Finance shows that only 22.7% of U.S. high school students in 2022 had access to a personal finance course. This lack of access means that the majority of young people enter adulthood without a solid foundation in managing their money.
While some schools are starting to include personal finance as part of the curriculum, it’s often not enough. Financial topics tend to be given less attention compared to other subjects, and in some communities, they’re not covered at all. The result is that many adults must learn about money through trial and error—which often leads to costly mistakes.
The Impact on Low-Income Communities
In low-income communities, the need for financial education is even greater. Without knowledge of basic financial principles, people may find themselves relying on high-interest payday loans or credit cards to cover essential expenses. These loans often come with high fees that can make it challenging to escape debt.
A study by the FINRA Foundation found that about 60% of people in lower-income brackets reported having difficulty covering basic expenses and paying bills. When people are financially educated, they’re better equipped to make decisions that help them avoid high-interest debt, save for the future, and create more stable lives.
A Simple Start: Improving Financial Education for All
The good news is that it’s never too late to improve financial literacy. Here are a few small steps to start learning:
- Start a Budget: Knowing where your money is going can make a big difference. Tracking your income and expenses gives you control.
- Learn About Credit: Take time to understand what affects your credit score. Websites like AnnualCreditReport.com allow you to check your credit report for free.
- Build an Emergency Fund: Having even a small amount set aside can prevent the need to rely on loans in an emergency.
- Seek Resources: Many communities offer free or low-cost financial education resources, like classes, seminars, and financial coaching.
Improving financial education won’t happen overnight, but every step toward greater financial literacy can have a lasting impact on individuals, families, and communities. With the right knowledge and resources, people can make better decisions for their financial futures, breaking the cycle of struggle and building a foundation for success.
