Many Americans are struggling with their finances. Over 60% of individuals live paycheck to paycheck and can’t set aside money for long-term goals.
Not only are low-income families struggling with this issue, but over 40% of Americans who earn between $150,000 and $200,000 a year live paycheck to paycheck. Student loan debt and credit card balances have also reached all-time highs.
Due to the increasing number of people living paycheck to paycheck, many states have started requiring financial literacy classes in public schools. This is a bipartisan issue, and seven states have already required financial literacy classes, while 34 have pending legislation. What are financial literacy classes, and how can they benefit students?
Being financially literate is a skill that individuals can use in their lives. Financial literacy classes help individuals develop a basic understanding of how to manage their finances. Some of the topics that are covered in these sessions include: opening a bank account, paying bills on time, managing a household budget, credit score improvement, and saving for retirement.
Being financially literate can affect every aspect of one’s life, and children must be taught about this skill early. A basic understanding of these concepts can help them avoid problems such as debt and poor spending habits. Financial literacy classes can also help individuals develop resilient financial habits.
Benefits of Financial Literacy
Children must learn about money early. According to a study conducted by the Financial Industry Regulation Authority, over half of the people with a high financial literacy were able to save more than they earned.
The study also revealed that 35% of individuals with low financial literacy spent less than they earned. On the other hand, 42% of those with a high level of competence had an emergency fund set aside. Having a basic knowledge of money can help children develop the skills they’ll need to make sound financial decisions as adults.
Studies show that financial literacy can help students make sound decisions throughout their lives. The Financial Industry Regulatory Authority’s (FINA) Foundation claimed that those with high levels of competence were less likely to be delinquent on their credit card bills, take out payday loans, and pay late fees.
Three years after financial literacy requirements were implemented in several states, credit scores and delinquency rates improved.
Understand Student Loan Debt
One of the most significant advantages of financial literacy classes is that they can help students become more knowledgeable about their student loans. Most college students take out loans to fund their education, but they often don’t understand what they agree to.
Kids can learn how to apply for federal grants, apply for scholarships, and fill out the FAFSA in financial literacy classes. These sessions will also cover the difference between private and federal loans, their cost-benefit analysis, and why federal financing is preferred.
Better Saving Habits
The pandemic showed how unprepared many Americans are for a financial crisis. A study by the Federal Reserve revealed that many people would need help coming up with $400 to pay for an unplanned expense.
Even small amounts can make a huge difference in a person’s financial situation. In financial literacy classes, kids learn about investing and compound interest. Moreover, the teachers who lead these sessions tend to see an increase in their savings.
Improves General Quality of Life
Many people don’t realize that having a poor financial situation can have a ripple effect on other areas of one’s life. Studies have shown that economic instability can lead to mental health issues such as depression.
People suffering from financial stress are more prone to experiencing various health issues. Individuals with high levels of stress often experience digestive problems and high blood pressure.
Being financially literate can help you manage your life’s ups and downs. This level of competence can also help you maintain better mental and physical health.
Children benefit from financial literacy sessions as they learn about budgeting, debt management, and saving. This type of education provides them with a solid foundation that they can use to avoid financial problems throughout their lives.