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(From the Portland Press Herald) – April is Financial Literacy Month in Maine and throughout the country. While financial literacy and the concepts associated with it should be part of our conversation on a regular basis, this month’s declaration provides an opportunity to highlight its importance even further.
Why is financial literacy important? Because the savings crisis in Maine and the entire U.S. is real, and a continued failure to do anything to help puts the financial solvency of many consumers at risk.
According to data from the Federal Reserve, if faced with an unexpected expense of $400, four in 10 adults said they would not have the money to cover it. A separate survey, conducted by Harris Poll for the job website CareerBuilder, found that 78 percent of full-time American workers live “paycheck to paycheck.” Overall, Maine ranked 39th in the country in funds remaining per paycheck after expenses, and more than a third of Mainers reported having $0 in savings. The U.S. Bureau of Labor and Statistics reports that the savings rate in our country today is at 6 percent, the lowest level since 2008.
A lack of savings doesn’t just cause more debt but also increases stress, which can lead to a host of health problems, both emotional and physical. In a survey conducted several years ago by the American Psychological Association, 72 percent of respondents cited money as a significant source of stress in their lives.
What can we collectively do about a lack of savings and an overall lack of understanding about financial literacy in general? Talking about savings and how to get started is a great beginning.
As a financial institution, we are committed to having more conversations with our members about how to save, and offering resources for how it can be accomplished. In order to get into the habit of saving, a person doesn’t have to save hundreds each week. If someone saved $10 a week, that would add up to $520 in a year. Building savings is, in many ways, a mindset.
While the concept of savings is a challenge, that is but one piece of the financial education puzzle. Many adults don’t take the time or have the experience to sit down and create a budget. Oftentimes, people don’t know how much money is coming in and how much is going out. Additionally, a credit score and how it truly affects a person’s ability to borrow is still a gray area for many people.
The good news is the issue of financial literacy is receiving more attention than ever before, especially among young people. Recently, our staff held one of our Financial Wellness Workshops for nearly 200 seniors at a local high school. The students had an opportunity to learn interactively by choosing a career at the age of 22 and completing a spending plan based on their career choice’s starting salary. Students visited various booths related to transportation, education, credit, housing and other life expenses.
Talking to students at the event showed that financial education is something they find valuable. One student remarked, “We don’t have a chance to learn about credit in school, so this was really helpful.” Another added, “As I prepare to go to college, the financial aid part was really eye-opening.”
Learning about financial literacy isn’t just for kids, either. People of all ages and stages of life can benefit from having a better understanding of money management and personal finance. A number of resources are available to help with financial literacy, including Maine Jump$tart, the Area Agencies on Aging, ProsperityME and many others. We partner with many of these organizations to provide support and expertise to serve their various constituencies. I would encourage others to get involved as well.
Financial literacy is a lifelong endeavor, depending on what challenges and opportunities life brings us at any given time. Our ability to navigate these challenges and opportunities will likely determine both our individual financial success and our economic success as a community. Let’s challenge ourselves to start a conversation about this issue, and then take steps individually and as a society to achieve financial wellness. It’s a choice that’s good not only for your wallet but also for your health.
David Libby is President and CEO of Town & Country Federal Credit Union, based in Scarborough, which serves Cumberland and York counties.