In March 2011, President Obama issued a proclamation establishing April of each year as National Financial Literacy Month in an effort to highlight the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits.
Financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security. Taken further, it is a dynamic understanding of finances and the economy, enabling each individual to respond effectively to ever-changing personal and economic circumstances. Lois Vitt of the Institute for Socio-Financial Studies defines financial literacy somewhat more comprehensively:
“Personal financial literacy is the ability to read, analyze, manage and write about the personal financial conditions that affect material well-being. It includes the ability to discern financial choices, discuss money and financial issues without (or despite) discomfort, plan for the future, and respond competently to life events that affect every day financial decisions, including events in the general economy.”
Recognition of the need to improve the financial literacy of many Americans surfaced as a result of the recent economic crisis in this country and around the world. Many consumers might not have been as adversely impacted if they had had a better understanding of the economy and their own financial circumstances, and had made the necessary preparations to protect themselves.
During National Financial Literacy Month, government agencies, private organizations and community groups make a concerted effort to raise consumers’ awareness about the benefits of learning more about their financial matters. The National Endowment for Financial Education and Money Management International are two nonprofit groups which offer consumers free webinars, worksheets, tips and tools for financial well-being.
Each Thursday this month on our blog, we’ll take a look at financial literacy across many different age groups and give you suggestions for improving your own financial understanding as well as your family’s. Financial Literacy Month is a great time to make a pledge to yourself that you are ready, willing and able to take responsibility for your financial future. Remember, financial literacy is the first step towards achieving financial health!