National Financial Literacy Month

April is National Financial Literacy Month – an entire month dedicated to learning, developing and maintaining healthy financial habits. Financial literacy and continuous improvement are cornerstones to who we are at Covenant Wealth Strategies.

Average American money habits reveal that:

  • Only 40% of adults use a budget and/or track spending
  • More than three out of four adults live paycheck to paycheck
  • Half maintain three months of expenses in an emergency fund and
  • More than a quarter have no savings at all!

The collective debt by Americans best illustrates why we need to increase financial literacy in America. More than a third of U.S. adults worry they won’t save enough by retirement, student-loan debt is measured in the trillions and almost half of American adults say they lack enough money for emergencies.

Teaching The Next Generation

The importance of financial literacy for children cannot be overstated. One of the most effective ways to teach children about money management is by encouraging them to open a savings account. The valuable lessons learned from having a savings account can serve them well as they grow older, and begin to think about buying a car, paying for college, or saving for retirement.

If a child wants to save up for a new bike or a video game, they can set a goal and track their progress as they save. This can be a powerful motivator for children to save more money and make better financial decisions. This can also help them learn about budgeting and how to prioritize their spending.

Introducing Children To Banking

Opening a savings account can also be a good way to introduce children to the world of banking. It can help them understand how banks work, how to use an ATM, and how to make deposits and withdrawals. These are all important skills that are not typically learned in the classroom.

Compounded Interest

A savings account can also be a great way to teach children about the importance of interest. When children see how the money in their savings account grows over time as a result of interest, they can learn about the power of compounded interest and how it can help them achieve their financial goals over time.

Have you heard of the Rule of 72? The Rule of 72 is a formula that calculates approximately how long it will take for an investment to double in value based on its assumed rate of return. The Rule of 72 applies compounded interest and can be applied to anything that increases exponentially, such as GDP or inflation. 

Credit and Credit Scores

In addition, it is also important to note that a savings account can be a way to teach children about credit and credit scores. Parents can teach their children how to manage their credit and how to avoid high-interest credit cards and loans.

A savings account is an essential part of any financial literacy program for children. It teaches children about the importance of saving money and it provides them with a valuable tool for achieving their future financial goals.  

If you are interested in increasing your financial literacy and would like to discuss your financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further. 

Disclosure:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.