Did you know that 45 percent of American households are living in a state of persistent financial insecurity, with almost no savings or financial plan for the future? Whether it be sticking to a budget, or paying off credit card debt, the majority of Americans are dealing with financial stress in one way or another. Which is why April has been declared National Financial Literacy Month—a month dedicated to teaching Americans how to better handle their finances and become financially literate.
“Being able to understand the background of your finances is a key component to general financial literacy,” says Two Rivers Bank & Trust Credit Analyst Kelsey Hull, “and is extremely important to your overall financial and personal success.”
Financial literacy is defined as the possession of knowledge and understanding of financial matters, and entails the knowledge of properly making decisions pertaining to certain personal finance areas, including real estate, insurance, savings and retirement planning. So, how do you know if you’re really financially literate? Here are a few questions to test your financial literacy (answers can be found at the end of this blog):
Contrary to popular belief, financial literacy is not something learned in a classroom, it is something learned over the course of a person’s life, and is the result of the key decisions one makes during certain moments in their life—like buying a new home or saving for retirement. In addition to key financial decisions, research also shows that behaviors that promote financial well-being in adulthood are built during one’s childhood and youth, which means we must start teaching our children to develop smart financial habits from a young age.
Even if you did not develop smart financial habits as a child, there are still steps you can take to improve your financial literacy as an adult.
Here are your answers to the above financial literacy questions.
Answer: To carry a balance on your credit card means to carry debt. Paying off your debt can help you build your credit, so keeping a balance on your account is never a reasonable solution to building your credit.
Answer: “A good rule of thumb is to pay off your debts with the highest interest rates first—whether that be your smallest or largest debt,” says Hull. “Once you’ve paid off your debts with the highest interest rates, you can then begin to reevaluate your additional debt moving forward.”
Answer: Social Security benefits do not kick in automatically when you retire. You need to apply for your benefits through an application process. You must also accumulate the appropriate number of credits and reach the age of 62 before you can apply for any Social Security benefits.
Answer: It is safer to put your money into multiple business investments. Spreading your money out among multiple investments minimizes your financial risk and decreases your chance of losing all your money due to one bad investment.
If you are concerned about your financial well-being, contact Two Rivers Bank & Trust today. As your neighborhood bank, we care about your financial future, and are here to ensure you remain on a smart financial path.