Money Management
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What You Need to Know to Get Through This Volatile Financial Time
With growing uncertainty we hope to provide some guidance. Here are 10 important things you can do with your money right now.
The post What You Need to Know to Get Through This Volatile Financial Time appeared first on MintLife Blog.
What You Need to Know to Get Through This Volatile Financial Time
With growing uncertainty we hope to provide some guidance. Here are 10 important things you can do with your money right now.
The post What You Need to Know to Get Through This Volatile Financial Time appeared first on MintLife Blog.
Guide to Opening a Bank Account for a Minor
Is it time for a young person in your life to start understanding how banking works? Do they get an allowance? Are they raking in some cash for odd jobs? Or perhaps they are just plain curious about how money works, or youâre eager to get them in the habit of saving? Whatever the trigger, […]
The post Guide to Opening a Bank Account for a Minor appeared first on SoFi.
Why Financial Literacy Alone Will Always Fail
April is financial literacy month, and itâs dedicated to educating people on basic money concepts such as budgeting, saving, debt, compound interest and investing, just to name a few. Given that only 57% of adults in the United States are deemed to be financially literate, itâs certainly something we need to address. Improving the financial literacy of all people is a noble cause, but many questions remain surrounding how to do it.
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Google financial literacy and you will find that there is no agreed upon definition, no standardized way to measure it, and no consistent process to ensure people are learning the right skills and how best to apply them in real-life situations. If you canât define financial literacy, you canât teach it. If you canât measure it, you certainly canât manage it or even judge whether financial literacy programs are improving financial health and wellness.
The one thing we do know is that the lack of personal financial knowledge costs U.S. households over $350 billion per year. Financial literacy is critically important to making healthier financial decisions, but financial literacy alone will fail because itâs only one piece of a much bigger puzzle thatâs part psychology, part life and part money.
Here are the three reasons why financial literacy, by itself, will fail.
1. Financial literacy is the wrong starting point
While there is no commonly agreed upon definition of financial literacy, there is one common theme among all of them: Poor financial health is due to a lack of education. Itâs considered a knowledge problem. Proper education is important, but financial literacy programs focus on the facts and figures and ignore our feelings (our emotions), which ultimately drive our behaviors. Itâs a mindset problem and not only a money and math problem.
For many, money is a cause of stress, worry, fear and even shame and embarrassment. Deeply rooted emotional issues and limiting beliefs about money will keep most people from making healthier decisions with it. More often than not, financial literacy programs address the technical aspects of money (the thinking and financial parts) and ignore the attitudes, beliefs and values (the emotional and psychological parts) around it. When 90%+ of the decisions we make are driven by emotions and not by logic, existing programs are starting from the wrong point.
2. Financial literacy doesnât lead to behavior change
Tony Robbins has been quoted as saying, âKnowledge is not power. Knowledge is only potential power. Action is power.â Itâs not what you know, itâs what you do with it that matters. Financial literacy and the programs that teach it focus on potential power (financial knowledge) and fail to provide real power (changes to behavior and actions) that can put people in control of the lives they want to live. In fact, studies have shown that improved financial literacy can explain just 0.1% of behavior changes that occur.
Our behaviors are driven by a complex web of emotions, attitudes, beliefs and values, and, without a clear understanding of how they drive our behaviors, more financial information will fail to produce real change. In short, information does not equal transformation. Financial literacy programs today are hacking at the leaves of change when they need to focus on the root of the problem and better integrate knowledge with healthier behavior.
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If you donât change your mindset (how you think), your habits (what you do), your systems (how you do them) or your environment (what shapes your choices), all the information in the world wonât lead to better financial outcomes. All of that being said, itâs important to note that in some cases there are greater systemic issues that limit oneâs ability to choose or to change circumstances, so the push for greater financial literacy is just the tip of the iceberg.
3. Itâs only one aspect of a much bigger financial (and life) pictureÂ
There is a continuum of care with financial advice that can lead to improved financial health and wellness, and financial literacy is only one piece of it. Improved financial well-being occurs when all the pieces of the puzzle are put together (or integrated) to support the bigger picture, and these include:
- An understanding of beliefs and attitudes, cultural and community values, and behaviors and sentiment.
- Appropriate levels of literacy, education and knowledge on various money-related topics.
- Access to the tools, resources and money management systems through which this knowledge can be applied.
- The right environment to help develop healthier habits and support ongoing behavior change.
- Ongoing financial planning to adapt to a dynamic, increasingly complex, and constantly evolving life â personally, professionally and financially.
Financial literacy and the programs that support it fail because they focus on one aspect of this continuum of care. It mirrors a problem in the financial services industry where advice tends to focus on one aspect of our financial lives: our investments. We need advice and guidance in all aspects of our lives and ongoing support, and often course corrections and adjustments, to achieve true financial health, wellness, security and independence.
The greatest challenge surrounding financial literacy
The biggest challenge facing not just financial literacy but improved financial health and wellness comes down to three words: access, inclusion and integration. Greater access to financial tools, resources and expert advice unlocks the door to opportunity. Greater inclusion brings all people and communities through the door to participate in better education and economic ecosystems (lack of inclusion is a broader systemic issue). Greater integration takes the individual pieces of the continuum of care, threads them together and truly drives greater financial health and prosperity.
Financial literacy alone will always fail to improve overall health and wellness, just as advice limited to investments will fail to help people eliminate financial stress, make smarter, more informed decisions in all aspects of life, and put them in control of the lives they want to live.
If we want to create real change, we need to create greater access to financial advice and ensure the inclusion of all people and communities. The key is to focus on the integration of all parts and not just any one of them, such as financial literacy, in isolation.
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What is a Joint Bank Account and How Do They Work?
Forget making it Facebook official. Opening a joint bank account is the true way to show youâre committed. OK, so not really. But for many married couples, long-term domestic partners, families and even roommates, joint bank accounts make budgeting and sharing bills easier to manage. What Is a Joint Bank Account? A joint bank account [â¦]
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5 Cash Management Strategies You Should Know
Cash management is a term often used by businesses to determine how much revenue coming in is available for day-to-day operations, and how much is available for investing in the future of the business. But cash management is important for individuals, too. Your own personal balance sheet is not unlike that of a business. You […]
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Chapter 9: Managing Your Money with a Budget
So far in this series, weâve discussed what a budget is, what you should include in a budget, and the various ways you can make a budgetâincluding zero-based budgeting, which we covered in Chapter 8. Now that you have all…
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The Best Personal Finance Podcasts for Renters
Mind. your money with one of these podcasts.
The post The Best Personal Finance Podcasts for Renters appeared first on The Rent.com Blog : A Renterâs Guide for Tips & Advice.