The Importance of Being Financially Literate

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.