A new paper published by the National Bureau of Economic Research indicates that if a consumer wants to avoid arriving at their retirement with no assets, then they must improve the financial literacy of their household.
Research shows that this can result in being able to treble net wealth.
American consumers were surveyed in regards to how they manage their credit cards, mortgages, personal loans and also retirement funds. A method developed by the Dutch Central Bank was used and the results indicated that financial literacy contributed to household wealth a great deal more than the consumer’s income.
Finance columnist Mythili Bhusnurmath explained recently that developing financial literacy can help in reducing the complexity of many financial decisions including those regarding savings, investments and general spending.
Home ownership is common across the United States, but many people lack any real understanding of how to manage assets which restricts the amount of benefit American consumers are getting from equity growth. The majority of Americans end up neglecting financial issues out of frustration and a lack of understanding.
There are growing concerns in regard to the number of college students who will graduate without any clue about how they should manage debts. As a result the Consumer Finance Protection Bureau is preparing to educate students in debt and other financial matters. A growing number of colleges are also requiring students to complete courses in financial literacy as a requirement of graduating. There is a worrying trend among students to take on credit cards and high interest personal loans because they have a tendency to ‘spend now worry later’ and do not really consider how they will go about earning enough to pay off the debts while still having money to live off of.
It is not just colleges who are beginning to take a serious look at financial literacy. Some employers have also turned their attention to the problem. Reports indicate that debt related stress can affect employee performance. As a result, three in every ten American employers are now offering one to one financial advice as one of their employee perks. The Society for Human Resource Management (SHRM) are teaming up with the American Institute of Certified Public Accountants to spearhead the ‘Workplace Leader in Financial Education’ (WLFE) Award which is intended to encourage employers to sponsor financial literacy programs.
American Express are one of nine businesses to earn the award so far thanks to their commitment to improving the financial health of their employees.
