11 Ways to Improve Financial Literacy - 401k Maneuver

11 Ways to Improve Financial Literacy

4 in 7 Americans are financially illiterate, according to Walden University – and that’s a serious problem.¹

Financial literacy is understanding financial concepts, including but not limited to budgeting, saving, paying off debt, and investing.

Those who demonstrate financial literacy often find it easier to enjoy financial well-being. Not only do these individuals meet their financial obligations without feeling stressed, but they also feel confident about their financial future.

According to the Consumer Financial Protection Bureau (CFPB), financial well-being occurs when someone has control over their day-to-day and month-to-month finances, can absorb a financial shock, is on track to meet financial goals, and has the financial freedom to make life choices.² 

Unfortunately, many Americans aren’t there yet.

Consider the following financial literacy statistics:

  • 73 million adults are struggling financially, and over 65% of Americans are financially illiterate and unable to manage their finances.³
  • The estimated average amount of money that lacking knowledge about personal finances costs people was $1,634 in 2020.⁴
  • Only 34% of individuals can answer four or five questions correctly on a basic five-question financial literacy quiz.⁵
  • Only 24% of millennials understand basic financial concepts.⁶

No matter your age or how close you are to retirement, there is still time to improve your financial literacy so you can feel more in control of your financial future.

Keep reading for 11 ways to improve financial literacy…fast. 

#1 Set Goals Based on Knowledge Gaps

improve financial literacy

The first thing to do if you want to improve financial literacy is to understand where you have gaps in your knowledge. Understanding all aspects of finance helps you make better decisions and may lessen financial stress. 

Start by using the CFPB’s “Find Out Your Well-Being Questionnaire” to get a general idea of where you need to begin.⁷ 

It may hurt your pride, but it’s worth it if it means becoming engaged with your finances.

Once you take stock of what you do and do not know, set goals to improve financial literacy and fill in your knowledge gaps. 

#2 Learn the Lingo

improve financial literacy

When you hear others talking about financial topics, it may feel as if they are speaking another language. In a way, they are.

Those who are financially literate have a different vocabulary from those who are not.

The good news is that it is possible to learn the lingo.

Not only is it easy to search online to find definitions for financial terms or acronyms, but there are also financial dictionaries, such as Barron’s Dictionary of Finance and Investment Terms and Investopedia.

Next time you hear a phrase or term you are unfamiliar with, take a minute and look it up. 

#3 Take Free or Paid Online Classes

improve financial literacy

Another way to improve financial literacy is to go back to school.

There are several different options for financial literacy courses – college courses, adult education classes, and free or paid online courses.

Search for free financial literacy courses on Udemy or Coursera that focus on the topics you know the least about.

For those who want to learn more about investing and 401(k)s, 401(K) Maneuver has a 401(k) Masterclass that covers 3 strategies that may supercharge 401(k) performance.

#4 Listen to Podcasts

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Many people believe they don’t have time to improve financial literacy. Podcasts make it easy to multitask while learning something new. 

There are several financial literacy podcasts, such as Planet Money and We Study Billionaires, that you can listen to as you commute, cook dinner, or relax.

#5 Watch Financial Videos and Shows

improve financial literacy

Along with listening to financial podcasts, there’s no shortage of shows and YouTube channels that are created to help improve financial literacy.

There are many people who start or end their day watching a few minutes of financial television programming.

When it comes to finding financial television programs, look for well-respected programming, such as Bloomberg TV and the Nightly Business Report.

Be careful to avoid anything that focuses on “get rich quick” schemes. 

In addition, look for YouTube videos and channels that provide quality educational content.

401(k) Maneuver’s YouTube Channel posts informative financial literacy videos each week.

#6 Keep a Budget

improve financial literacy

Keeping a budget helps fastrack your financial literacy because it’s a key component of financial well-being.

Managing your personal finances should help you feel more confident making important financial decisions. And, it also helps you avoid overspending and derailing your financial goals.

#7 Read and Read Some More

improve financial literacy

Reading is the hobby most of the world’s highest achievers share. 
According to Blinkist Magazine, “Supposedly, in the early days of [Warren] Buffett’s investment career, he would read 600-1000 pages in a single day. Nowadays, he still dedicates 80% of his day to reading.”⁸ 

The lesson here: read everything you can get your hands on – and then read some more.

There are countless books available to improve financial literacy.

If the thought of reading a finance book cover to cover sounds daunting, consider subscribing to newspapers like the Wall Street Journal and The Financial Times or subscribing to magazines like Fortune or Money.

If you do most of your reading on your phone, sign up for financial newsletter emails and follow financial bloggers on social media sites. 

#8 Use Money Management Tools

improve financial literacy

If you are a visual learner, money management tools may help improve financial literacy.

Budgeting tools, such as Mint, make it easy to visualize your personal finances while you manage them.

Software, such as Personal Capital, helps you get a big-picture idea of your net worth and investments. 

Also, money management tools tend to include learning centers and blogs that can help you expand your financial knowledge.

#9 Teach Your Kids about Money 

improve financial literacy

If you want to improve financial literacy fast, teach it to someone else.

This will force you to look up those terms you are unsure about and research examples to get a better understanding, so you’ll feel more confident teaching.

[Related Read: 17 Easy Ways to Teach Kids About Money]

#10 Pay Attention to Your Finances

improve financial literacy

Unfortunately, many people take a sit-back-and-relax stance toward their finances.

Once they open a checking or savings account, they stop paying much attention. Likewise, once they enroll in a 401(k), they set it to cruise control.

This is a mistake.

It is your money and your future. And you need to pay attention.

88 million investors are largely responsible for managing their own assets, and 92% of them have no idea what they are paying in fees. 

Don’t treat your statements like junk mail. Read them. Look for rate changes and fees. Make note of changes. 

#11 Talk to a Financial Advisor

improve financial literacy

One of the best ways to improve financial literacy is to speak with a financial advisor.

In addition to helping you manage your investments, a good financial advisor acts as a behavioral coach and helps you make decisions based on data and trends, not fear and worry. 

As a result, you should make better financial decisions. 

Before you reach out for help, check out our guide on how to understand The Different Types of Licenses Financial Advisors Have and What They Mean to You.

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Sources:

  1. https://www.possiblefinance.com/blog/financial-literacy-statistics/
  2. https://files.consumerfinance.gov/f/201501_cfpb_report_financial-well-being.pdf
  3. https://scholarworks.waldenu.edu/dissertations/8984/
  4. https://www.financialeducatorscouncil.org/financial-illiteracy-costs/
  5. https://www.usfinancialcapability.org/results.php?region=US
  6. https://www.possiblefinance.com/blog/financial-literacy-statistics/
  7. https://www.consumerfinance.gov/consumer-tools/financial-well-being/
  8. https://www.blinkist.com/magazine/posts/reading-habits-of-highly-successful-people

 

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