“We want it to outlive us, we want it to be generational.”
– Nipsey Hussle
Financial literacy is generally thought to include the ability to apply knowledge and skills to unique financial situations, and the behavior and attitude to engage in sound financial decision.
In 2023, the P-Fin Index showed that U.S. adults correctly answered only 48% of the 28 index questions gauging financial literacy. This is not good.
Financial literacy includes knowing how to budget, save, invest, and make other financial decisions. That’s what this site is all about. Financial literacy is important for everyone, regardless of their income or background.
A study by the World Bank found that financial literacy is correlated with a number of positive outcomes, including:
- Higher income
- Lower debt
- Better financial health
- Increased savings
- Improved financial decision-making
The Financial Effects of COVID (it’s not all bad)
Financial literacy and capability is particularly important when we consider the impact of the COVID pandemic. The recent FINRA study enumerated a number of findings coming out of the pandemic – and it’s not all bad!
Fifty-three percent of respondents reported having three months of emergency savings in 2021, compared to 49% in 2018, and 35% in 2009.
Stimulus funds were most frequently used to make purchases or pay bills (59%). Many Americans added the money to savings or used it to pay down debt (38% and 33%, respectively).
Respondents with higher financial literacy (scoring above the median on a seven-question financial literacy quiz) were more likely to make ends meet than those with lower financial literacy. They spent less than their income (53% vs. 35%) and set aside three months’ worth of emergency funds at higher levels (65% vs. 42%).
For Fathers, Like You
There are many reasons why financial literacy is important for fathers and children. First, it can help fathers make better financial decisions for their families. When fathers have a good understanding of their finances, they are more likely to make choices that will help their families reach their financial goals. For example, if fathers know how to budget, they can make sure that their families are not spending more money than they earn. And if fathers know how to save, they can build up a financial cushion in case of an emergency.
Second, financial literacy can help fathers avoid financial problems. When fathers know how to manage their money, they are less likely to fall into debt or make other financial mistakes. For example, if fathers know how to calculate interest rates, they can avoid taking out high-interest loans. And if fathers know how to invest, they can grow their money over time.
Third, financial literacy can help fathers improve their overall well-being. When fathers are financially secure, they are less stressed and more likely to be happy. Financial literacy can also help fathers achieve other goals, such as buying a home or starting a business.
For Your Children
Financial literacy is also important for children. Children who learn about financial literacy at a young age are more likely to make good financial decisions as adults. For example, children who learn about budgeting are more likely to avoid overspending as adults. And children who learn about saving are more likely to have a financial cushion in case of an emergency.
What You Can Do, Starting Today
Financial literacy is a critical life skill that everyone should have. Here are some tips for improving your financial literacy:
- Set financial goals and create a budget to help you reach those goals.
- Open a savings account and start saving money for emergencies.
- Pay off your debts as quickly as possible.
- Invest your money in a diversified portfolio to grow your wealth over time.
- Get professional financial advice if you need it.
Plus: Check out these resources for fathers and children:
- The National Financial Educators Council
- Jump$tart: Financial Smarts for Students
- The Consumer Financial Protection Bureau tools and resources
Also, visit our Personal Finance Resources page to help you on your financial literacy journey today. If you put in the time, you can be financially literate and extraordinary, dad. Then, your wealth can be generational for your kids, too.
