Today, financial planning and associated activities have become the epicenter of life. However, the lack of basic financial literacy skills can end in financial ruin. On the flip side, some individuals manage their finances and scale their personal/professional lives like a breeze. How is this possible? They learn financial literacy early in life and continue on a path of improving their finances over their lifetime.
Financial literacy is the ability to comprehend and effectively apply financial skills to better your life and those who depend on you. The skills include budgeting, saving, investing, protecting, and planning your finances. It can seem daunting, but you can become financially literate with a little education and practice and maybe achieve financial independence.
Unfortunately, many of us imitate our parents’(or other guardian’s) habits on finances. We become products of our environments. Improper budgeting leads to scarcity of money toward the end of the month, AKA living paycheck to paycheck. These financial issues impact the family's well-being and create more anxiety for a child’s relationship with money.
But not all families are inherently poor at budgeting. Some families can budget but are unable to plan for an emergency. Others may quarrel with one another on money matters, which also has a lasting impression on a child's relationship with money.
So how do we solve this problem? Instilling good habits begins in childhood. So, it’s better to impart financial education right from school age. It’s a huge task. However, many districts have taken on this challenge with great success. Kids must be encouraged to embrace math and financial concepts as early as possible. When children cultivate those habits, parents can actively involve kids in micro-financial planning. As children grow, we can teach them other financial skills such as savings and credit management. As children foster money management skills, they can take on real-life challenges with ease. By including financial literacy, schools can pave the path for a more civilized and developed society, which is their main objective.
The lack of financial literacy affects the wealth gap in brown and black communities. There is no denial a disparity in income and net worth distribution exists in the US. Many will attribute the wealth gap to racial discrimination and this is true to a certain level. However, financial illiteracy stands as the root cause of the perpetual wealth gap in today’s information age. Many teens can Venmo, CashApp, or spend PlayStation dollars with ease but cannot tell the difference between a W2 and a W4 tax form. This lack of financial literacy can lead to poor tax planning and cause irreparable damage.
Unfortunately, the lack of fund management skills can keep students from financially enjoyable adulthood. We cannot wait for our school systems to pick up the slack! Parents should instill financial confidence in their children early.
To be good teachers, we first get to be good students.
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Financial & Investment Advisory services provided by Money Script Wealth Management, PLLC "MSWM", a registered investment adviser offering advisory services in the states of Texas, California, Nevada, New York, North Carolina, and other states where exempted. MSWM does not provide specific tax or legal advice. Please consult your tax attorney and CPA.