Financial Literacy Month is observed each year in April. The goal of Financial Literacy Month is to help Americans get better at managing money. One study reported that only around 35% of Americans surveyed could answer four out of five financial literacy questions correctly! Financial literacy covers a wide array of topics related to money, like understanding how to use debt, why budgets are a key component of financial health, and how to invest. In honor of Financial Literacy Month, here are six smart money moves that can improve your financial literacy and your financial health.
Read a Book on Improving Your Finances
It’s important to keep educating ourselves about money management. Luckily, there’s a free way to keep updated with everything from basic financial literacy to more advanced topics like cryptocurrency. New finance books are published all the time, and most of them are available to check out at your local library for free.
- All Your Worth: The Ultimate Lifetime Money Plan: This book emphasizes the idea that instead of focusing on shaving off a few pennies here or there, it’s more valuable to focus on handling and minimizing bigger expenses (like monthly bills) that have a bigger impact on your overall financial picture.
- The Millionaire Next Door: Written by Thomas J. Stanley and William D. Danko, this bestseller is a great book for beginners. It helps people develop good financial habits by describing the basics of personal finance and providing simple, easy-to-understand instructions for how to set up your own financial life.
- Your Money or Your Life: Joe Dominguez and Vicki Robin teamed up to write this book that can help you understand your priorities, reconcile issues about living your values and how they impact your lifestyle, and learn about how to pay off debt while upping your savings rate.
Listen to a Financial Podcast
If you want to optimize your commute or workout time, commit to listening to a financial podcast once or twice a week. The nice thing about podcasts is that they are usually free, and there’s a wide range of podcasts out there, so you can find a host you enjoy listening to who covers topics relevant to your life and financial needs.
- Afford Anything: Host Paula Pant has built an extensive archive of episodes, meaning that listeners can focus on episodes that address their current needs.
- Couple Money: One of the biggest stressors in many relationships is money. Your partner or spouse typically has their own complex history when it comes to money, and they definitely have their own ideas about how money should be spent or saved. This podcast helps couples get on the same page and learn how to work as a team to build a solid financial future.
- Money for the Rest of Us: Our financial lives don’t exist within a vacuum. They are part of the overall money systems that make up our economy. Former money manager and investment strategist J. David Stein leads this easy-to-understand podcast that breaks down complex financial systems into focused topics so beginners can improve their financial literacy.
Set Financial Goals
One reason people sometimes struggle with getting their finances in order is that they do it in a piecemeal fashion. Perhaps they pay down a credit card, open a retirement account, or commit to a budget, but they do so without a larger understanding of what they are trying to accomplish. That’s why setting financial goals is so important! Once you have your “whys,” committing to your “hows” is much easier. Your goals should incorporate short- and long-term items. Your short-term goals might include paying cash for a vacation this summer and saving up for new tires, while longer-term goals might include building up a robust emergency fund, retirement savings, a down payment for a house, or money for your child’s education. Your goals should be unique to you: We all have different priorities in life, and those priorities should be what drives your financial goal-setting.
Check Your Credit Reports
One of the most important pieces of your financial identity is your credit report. Most people know that lenders check your credit report when you apply for a new credit card or a loan to purchase a home or an automobile. However, did you know that your credit score also dictates how much you pay for insurance and if you are eligible to rent certain apartments? Some employers may also pull your score as part of a background check. Here’s what you need to know about your credit reports:
- There are three main credit reporting bureaus: Experian, Equifax, and TransUnion.
- Credit reports provide a snapshot of your financial life. All open accounts, like student loans, credit cards, auto loans, and mortgages, are reported, along with closed accounts for some time after the closure. Negative items like collections and late payments are also recorded. Any other names you’ve used in the past and your previous addresses are also reported.
- Currently, you are entitled to one free credit report per week, so you can get a copy regularly and check it for errors.
- Different things remain on your credit report for different lengths of time. Closed accounts marked “paid as agreed” stay for up to ten years, negative items remain for seven years, credit inquiries remain for two years, and bankruptcies are reported for seven to ten years, depending on the type of bankruptcy filed.
- Check your credit reports from all three bureaus thoroughly. If you see addresses you never lived at or accounts you don’t recognize, dispute the information with each bureau.
Make a Budget
Start making a budget by going through the money you’ve already spent. You can accomplish this by either going through your transaction history on your bank and credit card statements or using an app like Mint that will download your transaction history and categorize your spending. The next step is understanding the difference between fixed and discretionary expenses. Fixed expenses include housing costs, insurance, utilities, and other bills that absolutely must be paid. Discretionary spending includes clothing, eating out, recreation, and other costs that you can change (at least to some degree). Budgets can be as complex or as simple as you need them to be to help you gain control of your money. Some people are happy with simple spreadsheets, while others choose to pay for more robust apps with easy-to-use interfaces.
Teach Financial Literacy to Your Child
The lessons parents teach kids lay a vital foundation for how well children grow up to manage their own money. It’s important to start teaching kids about money early and in age-appropriate ways. One way to do this is to have conversations about how your family chooses to spend its money. Another is to give your children an allowance but expect them to pay some portion of their own expenses using this money. For example, they might need to contribute 20% of their allowance toward the cost of a chosen after-school activity. Custodial bank accounts are available for minors at most banks and credit unions and are another great way to teach your child needed skills like how to make a deposit, how to earn money with interest, and how to regularly save a portion of their income. Helping them understand how to save up for a goal (like a toy, a game system, or even a field trip) also teaches them important skills. Parents of older kids and teens can also sign them up for a debit card specifically aimed at their age group that can help to teach them further money management skills.