We hear a lot about the importance of basic literacy, the ability to read and write, but not as much about the need for financial literacy, the skills to understand and manage your personal finances. However, the current recession makes financial literacy a national priority.

Consider this statement from the Jump$tart Coalition for Personal Financial Literacy: the Coalition has “determined that the average student who graduates from high school lacks the basic skills in the management of personal financial affairs. Many are unable to balance a checkbook and most simply have no insight into the basic survival principles involved with earning, spending, saving and investing.”

This is startling news! How can we expect the general public to make wise personal financial decisions, like when obtaining a mortgage loan, if the average person doesn’t know how to balance his checkbook? Survival in the greatest economy in the world depends, at some level, on an educated consumer. Prosperity does too.

The writer of Proverbs says, “Be sure to know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations” (Prov. 27:23-24).

Three thousand years ago people managed their flocks and herds. The transfer of wealth from one generation to another was largely agricultural. Today we manage our investments in stocks, bonds, mutual funds, real estate and precious metals, but the principles are the same. This generation is in danger of losing their financial security because they don’t know how to “give careful attention” to their money.

According to a recent study conducted by the University of Washington and the Aspen Institute, “the financial literacy of high school students has fallen to its lowest level ever, with a score of just 48.3 percent” on a recent survey. That’s a failing grade! The good news is college students did much better and showed improvement as they reached their senior year, averaging 64.8 percent. However, only 25 percent of young adults in America are graduating from college. Yes, only 25 percent! That means that 75 percent of our population is likely to lack the skills necessary to manage their personal financial life.

No wonder so many people were easily deceived by recent mortgage practices that contributed to the crash of our financial system starting in late 2008. How can the buyer beware when the buyer is uneducated in matters of personal finance? Of course the educated people we elected to Congress passed the legislation that allowed for these mortgages. But at the end of the day, nobody held a gun to anybody’s head who signed up for a subprime loan.

As recent as March 31, 2009, Congress designated April as “Financial Literacy Month.” Applause! Applause! It’s a step in the right direction but we need to do more than raise awareness. Starting now, personal financial planning curriculum needs to be a required part of the K through 12 education experience.

Parents too are responsible for modeling healthy financial decisions and for teaching their kids how to do the same. It's the only way to turn around a financial literacy crisis, and perhaps avoid another unnecessary recession.

Comments

mack says:
Thanks for sharing such great post, according to me Our financial life planning is also the same as football, there are so many similarities like never give up, have patience, try another goal, etc. For more details on Personal Financial Planning refer http://www.prime-targeting.com/personal-financial-planning-and-soccer/

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