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The Importance of Financial Literacy

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January 14, 2022

Financial Literacy-Part one of a three-part series.

By Chip Wagner–

Why is financial literacy important to you? Two-thirds of our country is struggling with money issues. Understanding finances takes on a special urgency when living in Westchester County, one of the most expensive locations in the nation. Recent statistical surveys indicate that in a two-child Westchester household with both parents working, a satisfactory level of pre-tax income is approximately $120,000.

Your financial literacy is the foundation of your relationship with money; it is a lifelong challenge, and it represents a journey of learning. The earlier you start this journey, the better off you will be, because education and the pursuit of financial literacy is the key to financial success. Why should you care about financial literacy?

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First a few of facts:

  • The past few years have caught many people unprepared! Surveys by the Federal Reserve Board indicate 36% of Americans would have difficulty paying for a $400 emergency,
  • Eight out of nine Americans carry an average debt of $30,000 or more
  • Average student loan debt is $38,792
  • If you are 50 or younger, Social Security is unlikely to be fully funded for your retirement
  • The simple “rule of 72” will tell you how long it takes to double your money The Rule of 72 estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns four percent, divide 72 by four to get the number of years it will take for your money to double. In this case, 18 years
  • Credit scores don’t always improve when you don’t borrow any money and can impact more than your ability to borrow
  • According to a study by Clever, a digital learning platform, in 2020, the average New Yorker did not earn enough just to cover expenses

There are six basic principles of financial literacy…earn, spend, save, invest, borrow and protect. Among these, spending is a topic that demands a lot of time regarding budgeting, wants and needs and smart shopping.

Some people may have learned the basics at home, in school, or in their work, however today in an ever-changing world, there is no doubt we all need to play a bigger role and take ownership of our own financial well-being. The government is doing less. Many corporations have ended their pension plans, and yes, we are all living longer. Are you ready to live in retirement for 30 YEARS WITHOUT A PAYCHECK!

Here are some simple ways anyone can improve their financial literacy:

  • Hit the books, start with “Rich Dad Poor Dad” by Robert Kiyoski, and “The Millionaire next door” by Thomas Stanley
  • Read magazines and online publications, for example the Wall Street Journal and Bloomberg Businessweek
  • Listen to podcasts & websites, for example Khan Academy, “Better Money Habits,” and Freakonomics
  • Take a financial literacy course either online or at your local community college.

(This is the first of a three-part series by Chip Wagner.  A longtime member of the Rotary Club of the Tarrytown’s, he recently retired after 38 years at Merrill Lynch and his mission in this next chapter of his life is to educate people to manage their finances wisely. This Spring semester, starting in February 2022, he will be teaching two classes at Westchester Community College (Course No. 1: A Checklist for the Future! Discover what you need to consider at every stage of retirement starting at age 50, Course No. 2: Six Concepts to Improve Your Financial Literacy Tool kit for financial planning). A description of the courses and information on how to register can be found here: https://lnkd.in/euPKqvaK,)

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