Thursday, September 29 2022

April is National Financial Literacy Month, a time when young people and adults focus on their financial future and well-being. An estimated 3.4 million high school students will graduate this spring, and while they are well versed in math, English and science, many are often ill-equipped when it comes to financial literacy.

Originally promoted by Jump$tart Coalition as Financial Literacy Month for Youth, the awareness initiative morphed into National Financial Literacy Month in 2000 to be more inclusive and encourage financial literacy skills American consumers of all ages.

Financial literacy is a broad topic that covers multiple aspects that contribute to positive financial well-being. According to the Consumer Financial Protection Bureau, financial well-being is best defined as follows:

  • The ability to meet all financial needs today and over time.
  • Feel secure in your financial future.
  • A capacity to absorb a financial shock.
  • Having the financial freedom to make choices and enjoy life.

According to BBB’s 2019 report Exposed to Scams: What Separates Victims from Non-Victims, consumers with low levels of financial literacy are more likely to lose money when engaging in a fraudulent business. A high level of financial literacy can best be described as confidence in understanding financial concepts, including saving, investing, debt, and other elements that lead to an overall sense of financial well-being and of self-confidence.

Often the best way to start and maintain positive financial habits is to create and follow a budget. However, a 2021 study by The Harris Poll on behalf of the National Foundation for Credit Counseling (NFCC) and Wells Fargo found that less than half (44%) of the general population have a budget and are watching closely. how much she spends. on food, housing and recreation.

According to the FTC’s 2021 Consumer Sentinel Network data book, reports of fraud and identity theft in the United States continue to increase significantly. Over the past five years, the number of fraud, impersonation, and other reports submitted to the FTC has increased 96.1% to more than 5.7 million in 2021. While the tactics of scam artists and scammers are constantly evolving to overcome programs and systems focused on preventing their impact on the market, individual consumer efforts to increase their financial literacy are often the deciding factors in determining whether a victim loses money because of tricks of a scammer.

In recognition of National Financial Literacy Month and to help consumers increase their financial literacy, the Better Business Bureau provides the following tips:

Protect your personal information.

In today’s digital world, protecting your personal information goes beyond shredding sensitive documents. While collecting, storing, and disposing of sensitive documents goes a long way in preventing identity theft, consumers should also assess their digital footprint. Consider implementing multi-factor authentication systems on your most sensitive accounts, such as your online bank, utility, insurance, and medical accounts.

Proper disposal of electronic devices can prevent crooks from accessing data stored on hard drives and is a modern equivalent of shredding services. To help consumers properly shred sensitive documents and recycle their electronics, BBB hosts Secure Your ID days in communities across the country that offer free shredding and e-waste disposal services. Visit BBB.org/SYID to find an event near you.

Create and stick to a budget.

Following an organized budget, whether weekly or monthly, can be beneficial for the longevity of your financial well-being. Especially for young people, practicing financial budgeting can increase confidence, self-confidence and independence.

Parents can help their children establish healthy financial habits by establishing a regular allowance or budget that young people will receive and discussing their expected expenses. Once the child begins to earn their own income, they can apply the budgeting lessons learned to their finances.

There are countless resources available for free online to help create a budget, including the Consumer Financial Protection Bureau, which offers a budgeting worksheet that consumers can download for free.

Understand the dangers of debt.

As tempting as it may be to buy the latest and greatest product using a credit card or payment plan, debt can quickly spiral out of control. Take the time to understand the terms of loans, credit cards, lease-to-own or deferred payment options offered by a banking institution or company. Review the annual percentage rate of charge (APR) of the payment and whether it includes fixed, simple, or compound interest.

Figure out your debt-to-income ratio by adding up all your monthly payments and dividing by your gross monthly income. The higher this percentage, the more difficulty consumers may have in making their monthly payments. Most mortgage companies use the 43% debt-to-equity ratio to determine that a borrower can receive a qualifying mortgage.

For more information and to participate in Jump$tart events this National Financial Literacy Month, visit Jumpstart.org.

For more resources from the Consumer Financial Protection Bureau in creating and maintaining a budget and other financial tips, visit ConsumerFinance.gov.

Find BBB Accredited Financial Consultants near you who are committed to ethical business practices on BBB.org.

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