Most folks are uncomfortable talking about their financial situations. It’s just one of those subjects that make people squirm a bit when the topic is raised. Even inside the walls of their own homes it’s difficult for many families to have honest discussions about their financial problems.
That reluctance to talk openly about money has long been a stumbling block for generations of children who grew up knowing little, if anything, about managing their money and their debt, or living within a budget. In fact, most don’t even know how to balance a checkbook, or reconcile a monthly bank statement.
The closest some ever come to learning those valuable life lessons is the broad, and difficult, look at the production, distribution and consumption of goods and services that make up the study of Principles of Economics. Try digesting those micro- and macro-concepts before you know the basics of proper financial responsibility.
The sad story of the failure to educate ourselves and our children about handling money is easily seen in the dismal personal savings rate of U.S. citizens.
In the latest statistics from the U.S. Bureau of Economic Analysis, as of August the average U.S. citizen was saving just 4.2 percent of their disposable income.
That’s the lowest rate of savings in this country since the middle of 2008, and it puts the U.S. low in world rankings. Compare, for instance, our savings rate to the 12.8 percent average for the European nations, the 12.9 percent rate for Japanese, the 9.7 percent rate for Germans, and the 8.8 percent average for Australians.
Thankfully, the push for financial literacy is gaining ground, and Alabama is one of five states leading that much-needed effort. The “Sweet Home” state launched its initiative in 2013 when the Legislature made it a requirement that personal finance instruction become part of the ninth-grade career preparedness course.
That was a wise decision that should help pave the way for a better understanding of why money management training can become an integral part of improving the adult lives of our future generations.
Hopefully, it will help strip away the fear of discussing money problems in our homes, and give young parents the basic knowledge they need to teach their children how to manage a checking and savings account before they graduate from high school.
Maybe it will become the genesis for a record-setting generation of savers, who practice the principles of establishing household budgets; who learn the powerful benefits of a “pay yourself first” strategy for savings; and who reap the rewards of the seldom-discussed wonder of compounding.
And most of all, let’s hope it leads to a firm understanding that the habit of spending and living beyond your financial means by maximizing every credit option available is the best way to destroy a healthy financial plan.
Personal finance may be the subject few want to discuss, but in reality, it’s a subject we all need to learn to talk about.