How Americans Can Get Better at Financial Education

Let’s face it, America has a financial literacy problem on its hands, and most don’t like talking about it. It’s not easy to admit you don’t understand how to manage your money. Still, in reality, lots of Americans are in the same position.

Who is responsible for teaching youth how to manage their money effectively? Is it the schools, the parents, or the children themselves? It seems like for the longest time, it has been an individual responsibility to educate yourself on your finances. For such a complicated subject, that’s no walk in the park.

Your financial wellness is a significant part of your life and how you provide for your family and yourself. Becoming financially literate, while complex, is essential to your ability to make sound financial decisions and protect your wallet.

Just how much are Americans struggling financially?

A financial literacy study by Forbes indicated that “two-thirds of American adults can’t pass a basic financial literacy test.” The lack of financial literacy has a domino effect on financial wellness. Financial wellness is about being in a good place with your finances, and knowing that you are prepared for the worst while living your best.

How bad is the problem? Forbes says that an incredible “44% of Americans don’t have enough cash to cover a $400 emergency.” With the current prices of most typical emergencies, even that doesn’t get you very far.

The thing about emergencies is that they’re always unexpected. When you are dealing with an emergency, the last thing you want your attention to be on is your wallet. Some might call this money their “rainy day fund.” Having money set aside for emergencies will help give you that peace of mind.

Lack of Financial Education in Schools

Don’t you wish you had spent more time learning about your finances in school and less time learning calculus? Learning how to manage your money is an incredibly valuable skill set, yet many schools never teach it.

The National Financial Educators Council says the reason is “a mix of inertia in the system and a failure to recognize financial literacy as one of the core skills needed to succeed in the 21st century.”

There are efforts to change financial literacy efforts in schools to hopefully correct this problem. At a time when schools have failed to act, non-profits have tried to help. One non-profit organization, Junior Achievement, says their “preparation involves our proven lessons that promote financial capability, work and career readiness, and business ownership.” It’s time we brought those concepts into required coursework, in turn, providing equal opportunity for all to succeed.

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No Finance Lessons at Home

It’s no secret that schools aren’t teaching children about money, so why aren’t parents? It’s because most feel they don’t have the knowledge to do so themselves. A 2019 study from COUNTRY Financial stated that 61% of Americans consider parents a key influence in shaping the way they manage their finances, even though 46% of parents give their level of financial literacy a grade of C or lower. It’s a cycle.

While it is important that parents understand personal finances, they do not need to be the expert on everything. Parents should convey best practices but also encourage children to do their own research to determine what may be the most appropriate way to manage their money.

How Adults Can Educate Themselves on Financial Wellness

Being financially literate is vital as an adult as you prepare for major life events and the unexpected. Adults can find free educational material online in courses such as Kahn Academy and use Google to find articles by reputable financial firms to read about best practices.

You can also take advantage of apps and websites such as Mint, which can help you manage your finances all in one place, and on-demand pay apps like Rain, which prevent you from having to take out loans or overdraft your bank account just to make it from paycheck to paycheck (note: your employer must be signed up for Rain before you can use it to access your wages).

How Parents Can Teach Kids About Financial Wellness

Teaching your kids financial wellness doesn’t have to mean breaking out a calculator and doing complex math or even knowing everything about finance, for that matter. As a parent, you can demonstrate responsible financial behavior to your child. Explain what you do to earn a paycheck and how you use that paycheck to buy items of the utmost importance to the family.

Discussing responsible buying decisions is equally important. For example, explain why you buy generic products over purchasing the brand name and how that saves money that can be re-budgeted towards other purposes. You can also teach the value of a dollar by giving your kids allowances for completing their chores, but encouraging them to save at least a portion of their allowance rather than spending it on toys.

Lastly, you can take advantage of online resources for kids (rather than making up the material by yourself) such as any of these games that teach financial wellness skills.

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The Employer Responsibility

While improving financial literacy efforts in schools and encouraging parents to teach these skills to their kids is important, we believe employers hold a lot of responsibility for financial education. Employers are in a unique position to influence the way people see their paychecks.

By providing an early wage access benefit through Rain, employees can feel the financial freedom of being able to access their earnings whenever they want, instead of waiting for payday. On-demand pay has been proven to relieve financial stress by reducing the need for payday loans, cutting down on overdraft fees (which can be as high as $30 each time), and providing funds for emergency situations. Rain also provides access to other financial wellness benefits such as a live chat financial wellness coaching (available 24-7), discounts on health and wellness benefits, and a library of financial literacy content.

If you are an employer interested in signing up for Rain, click here. If you are an employee at a company that is not offering Rain yet, please send our website link to your HR or benefits team and let them know you’d like them to set up Rain (it doesn’t cost them anything).