The Secret Millionaire’s Club lesson removed from the web

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We all encounter money most days whether that’s popping to the shop or paying the bills. Most of us have bank accounts, and many have mortgages and credit cards. These are now among the basic things of everyday life and yet many have no idea how exactly their mortgage works, or how to judge which is the best bank account for them. Financial literacy is having the skills and knowledge that lets you make informed and effective decisions about your money.

Financial literacy is a core life skill for participating in modern society. Children are growing up in an increasingly complex world where they will eventually need to take charge of their own financial future. From an early age, children need to develop the skills to help choose between different career and education options and manage any funds they may have, whether from pocket money or a part-time job. These funds may entail the use of savings accounts or debit cards, such as the Bexcard. As they grow up, they’ll be faced with more and more decisions about their finances which they’ll need the skills, knowledge, and mindset of financial literacy to make. Studies have shown that people with appropriate financial literacy training make better financial decisions and manage money better than those without such training. So equipping young people with the necessary skills early can make them richer later in life.

The OECD’s Principles and Good Practices for Financial Education and Awareness recommend that financial education start as early as possible and be taught in schools. This is why Bex has taken their knowledge and resources into schools to help pupils get to grips with these sorts of topics at an early age. However, financial education is a long-term process and can’t be taught in just one afternoon but comes from consistent learning and experience. Building it into curriculums from an early age allows children to acquire the knowledge and skills to build responsible financial behaviour throughout each stage of their education. This is especially important as parents may be ill-equipped to teach their children about money as levels of financial literacy are generally low in every age group.

Financial literacy is the confluence of financial, credit, and debt management knowledge that is necessary to make financially responsible decisions — choices that are integral to our everyday lives. Financial literacy includes understanding how a current account works, what using a credit card really means, and how to avoid debt. In sum, financial literacy has a material impact on families as they try to balance their budget, buy a home, fund their children’s education, and ensure an income for retirement. It’s having to make big decisions like these that can make dealing with finances a painful experience, and one you’d rather avoid. Many people perceive financial decision-making and education as difficult and anxiety-producing. People reported that choosing the right investment for a retirement savings plan was more stressful than a visit to the dentist, according to the Organisation for Economic Co-operation and Development (OECD).

This aversion to dealing with money has meant that many consumers have little understanding of finances, how credit works, and the potential hit to financial well-being that poor financial decisions can cause for many years. Unfortunately, some changes in consumer habits and financial products have made it even harder for people to manage their finances. In the past, most people used cash for daily purchases. Today, credit cards are more frequently used. The way we shop has also changed. Online shopping is now the top choice for many, which can make it easy to use and become an all-too-convenient way to accumulate debt quickly. Meanwhile, credit card companies, banks, and other financial institutions are inundating consumers with new products and opportunities that often aren’t clearly explained. Without the proper knowledge, it is easy to get into financial trouble. Individuals need to shore up their financial knowledge to manage their day-to-day financial lives while also taking a longer view for the future. Developing an awareness of how we spend and save better is a key lesson of financial literacy.

Longer lifespans mean we need more money for retirement than earlier generations did. Retirement planning is an example of the increasing responsibility people must take for their own financial security. Past generations depended on company pension plans, now known as defined-benefit plans, to fund the bulk of their retirement. These pension funds, managed by professionals, placed the financial burden on the companies or governments that sponsored them. Consumers were not involved with the decision-making, rarely even contributed to their own funds, and were rarely aware of the funding status or investments held by the pension. Consumers are now also often asked to choose from various investment and savings products. These products are more sophisticated than they were in the past, requiring consumers to select from different options that offer varying interest rates and maturities, decisions they often are not adequately educated to make. The choices made from among complex financial instruments with a large range of options can impact a consumer’s ability to buy a home, finance an education, or save for retirement, adding to the decision-making pressure. Then, too, the number of institutions offering products and services can be daunting. Banks, credit unions, insurance firms, credit card companies, brokerage firms, mortgage companies, investment management firms, and other financial service companies — not to mention financial planners, money managers, and other professionals — are all vying for attention, creating confusion for the consumer. Taken together, these factors can cause conflicting views and difficulty in creating, implementing, and following a financial roadmap for the future.

Any improvement in financial literacy will have a profound impact on people and their ability to provide for their future. Recent trends are making it all the more imperative that consumers understand basic finances because they are being asked to shoulder more of the burden of investment decisions in their retirement accounts, all while having to decipher more complex financial products and options. Becoming financially literate is not easy, but when mastered, it can mean you live a happier, healthier, wealthier life.