Understanding basic money management skills such as living within a budget and handling credit and debt is very important for students. Having little or no knowledge regarding financial management can affect students in many different aspects of their life. It can affect their academic performance, mental and physical well-being, and even their ability to find employment after graduation (Bodvarsson & Walker, 2004; Lyons, 2003, 2004). The 2013 Consumer Financial Literacy Survey , conducted by Harris Interactive, reports that only 40% of Americans have a budget, 26% don’t pay their bills on time, 60% of adults have never checked their credit scores and 65% have not viewed their credit report. Therefore, being financially literate is important and understanding this topic may help student’s lead better lives.
What does it mean to say that one is “financially literate”? Mason and Wilson (2000) defined financial literacy as a “meaning-making process” in which individuals use a combination of skills, resources, and contextual knowledge to process information and make decisions with knowledge of the financial consequences of that decision. Becoming financially literate does not mean learning from trial and error but managing finances proactively. Here are a few tips to improve financial literacy:
- Educate oneself by reading financial books about setting financial goals and saving money
- Get guidance from a financial counselor to successfully manage your finances and reduce debt
- Take classes within your local community that offer information about finances
- Set up accounts through websites which provide resources and tools to assist you with making good financial decisions
Becoming financially literate can show you how to budget, manage debt, approach investing in a disciplined way, and set up a retirement account. These are healthy financial skills to incorporate into your life style and share with others in your household. The Financial Literacy and Education Commission (FLEC) have developed a national strategy to promote financial literacy and education. As a result, the Department of Treasury has created a website, www.mymoney.gov, which provides resources on how to make the best financial choices during major life events. The resources within this website provide background information, helpful guidance, and hints and tips to assist with various financial decisions.
By Shalena Gonzales
Financial Aid Specialist, American Public University