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Defending financial literacy – News
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Financial expert Dr. Jeff Jones offers insights on how to better manage personal finances.
In an era marked by economic fluctuations and evolving financial landscapes, the importance of financial literacy cannot be overstated.
To mark National Financial Literacy Month, the personal finance website WalletHub recently published its report on the States with the highest and lowest financial literacy in 2024. Missouri was in the middle, at no. 24.
To determine the rankings, WalletHub conducted an analysis of financial education programs and spending habits in all 50 states and the District of Columbia. The study looked at 17 key metrics, such as the proportion of adults with rainy day funds.
Key analyst findings include:
- Too many Americans still lack comprehensive financial literacy, which can lead to negative consequences such as reduced lifetime wealth.
- States should prioritize teaching financial literacy from a young age.
According to Dr Jeff Joneshead of department of finance, economics and risk management at Missouri State University, it is difficult for people to become financially sustainable without an understanding of financial literacy.
It clarifies how to manage personal finances amid the challenges of the current economic environment, characterized by significant inflation.
Tips for managing personal finances
During periods of high inflation, consumers must be prepared to incorporate financial flexibility into their budgets.
“This may mean cutting discretionary spending (dining out, entertainment, etc.) to provide a buffer for potential increases in non-discretionary items (food, housing, utilities, insurance, etc.),” Jones said.
He adds that the most reliable way to build wealth is to consistently spend less than you earn and invest the surplus in assets that are expected to generate favorable returns over the long term.
Teaching financial knowledge to children
Parents play a key role in equipping their children with essential financial knowledge from a young age. Jones emphasizes the importance of talking about money with children “so they can learn money lessons when the stakes are lower.”
“The fundamental economic problem is that people have unlimited needs and limited resources. The first lesson to teach children is the difference between a want and a need,” Jones said. “The second lesson is to instill how many hours a person might have to work (opportunity cost) to purchase a certain item or experience.”
Additionally, encouraging children to have “skin in the game” promotes accountability and cultivates financial responsibility, essential traits for successfully navigating adulthood.
Promote financial education in schools
The fundamental lessons for having financial knowledge should begin in elementary school, with relevant activities, such as playing a game of needs versus wants or creating a budget to buy items for an imaginary party. These lessons can then be reinforced by parents at home.
At the high school level in Missouri, students must complete an independent half-credit personal finance course to graduate. Missouri is one of 17 states that require personal finance courses in high school. Courses cover subjects such as making financial decisions, earning income, purchasing goods and services, saving, using credit, protection and insurance, and financial investment.
“Universities can reinforce concepts learned in high school by providing students with access to seminars or events related to understanding personal finance issues,” Jones said.
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