As the nation approaches the debt ceiling, lawmakers are attempting to fix a multi-trillion dollar budget crisis, but a national trend shows the personal finance crisis may be just as big of a problem.
Financial literacy is understanding and practicing good financial habits, and it has become a topic of major concern everywhere from BYU campus to the U.S. Senate in recent years.
A recent study by the National Foundation for Credit Counseling reported two in five Americans carry credit card balances from month to month. About the same proportion of Americans said they would give themselves a grade of C or lower for their understanding of personal finance.
David Feitz is the executive director of the Utah Higher Education Assistance Authority. Feitz said basic financial literacy is important for college students.
“Being financially literate is a key element in understanding how to pay for college in the most economical ways,” he said. “They should understand interest rates and paying down loans. Most of the time students using loans for school is their first exposure to credit.”
Feitz explained a big part is understanding when to use debt and when to avoid it.
“You know the saying: the only thing more expensive than paying for school is to not go to school,” he said. “A degree increases your earning capacity.”
Feitz warned, however, against a few common pitfalls for students.
“I think there are a couple things that gets students into trouble: credit cards and cars,” he said. “It’s good to have a car but your decision needs to be economical.”
In March of 2004, the Senate unanimously passed a resolution which officially recognized April as National Financial Literacy Month. Since then, numerous government and private organizations have developed programs to help improve the nation’s financial literacy.
Morgan Vandagriff co-founded Banzai, a financial literacy program for high schools and middle schools. Vandagriff said learning these concepts early in life allows for greater opportunities later in life.
“Exercising financial restraint isn’t … so very difficult when you are starting out with a blank slate,” he said. “It’s not so hard to avoid making bad decisions. It’s much easier to avoid bad decisions than to undo consequences of decisions you already made.”
The National Council on Economic Education reported more than 9 in 10 adults and students believe it is important for the people of the United States to have a good understanding of economics. However, only half of high school students said they have ever been taught economics in school.