If financial literacy is the gift that keeps giving, financial illiteracy is the endless cycle of compounding costs and dwindling savings.
The National Financial Educators Council estimated that in 2017 alone, lack of knowledge about personal finance cost Americans over $280 billion dollars. That’s a lot of moolah.
I don’t know a soul who argues against the benefits of financial literacy or who couldn’t easily rattle off a quick list of benefits that financial knowledge provides. The consequences of financial illiteracy are just as easy to conjure up.
1. Becoming an Easy Target
Suckers aren’t born every minute, they’re minted; molded by their environments and guided by their own motivations. No one is born financially savvy. We develop financial skills, urged on by interest and desired outcomes.
If you chose to ignore your financial responsibilities there are predators a plenty who will take advantage of your lowered guard. Don’t like to read fine print? You’re about to get a lesson in experience. Are you more interested in what something costs you on a monthly basis versus the overall total cost of the item in question? Chances are that item is going to cost you more.
There’s plenty of “sales training” available to those who would separate us from our earnings. Engage in a little “consumer training” of your own to gain equal footing.
2. Losing Your Independence
One of the greatest benefits of lifelong financial preparedness is freedom. Freedom from dependence. Freedom from having to rely on other people’s earnings. Freedom to pursue your life as you see fit.
Mary Gresham, an Atlanta-based psychologist who specializes in money issues puts it this way, “Because money is so essential in our society, if you don’t earn it or manage it, it’s easy to feel inadequate and like you have no control in your life.” That lack of control and independence can lead to life crises. For instance, studies suggest that victims of domestic abuse who lack financial stability are more likely to return to their abusers.
Things don’t have to get that dire for you to feel hamstrung by financial dependence. At a minimum, if you are financially illiterate, you lose freedom of choice.
Without financial independence, there is no independence at all.
3. Everything Costs More
It’s expensive to be poor.
Financial illiteracy leads to mistakes. Costly mistakes. Those mistakes lead to lower credit scores which lead to higher costs of borrowing.
Choosing the wrong financial services provider, credit card, or loan product can lead to higher costs, lower dividends, and unexpected fees. The costs of financial illiteracy build upon themselves.
Credit unions can make an impact on the financial literacy of their members and the communities they serve. A free program, the Millionaire’s Club, is available for any credit union, credit union league, or other organization. This high school-based program effectively delivers the financial skills needed to help participants to avoid the consequences of financial illiteracy.
Complete information on the credit union-centered program is available at MillionairesClub.Org.