The Importance of Financial Literacy
Making thoughtful and informed decisions about your finances is more important than ever. Several trends are converging that demonstrate the importance of financial literacy:
- More and more, the burden of making sound financial decisions is coming to rest on the shoulders of consumers. Many companies have shifted their retirement plans from traditional pension plans to those requiring employees to participate in, pay part of the cost for, and make investment decisions about. 401(k) plans are the best example of this.
- Social Security used to be seen as a major source, if not the major source, of retirement income. Now it serves more like a safety net that will provide enough only for survival, not enjoyment.
- We are living longer. This means that we must have accumulated more funds before retirement to cover living expenses over a longer time. Otherwise, we could become a burden for our families.
- The financial environment seems like it is changing faster. Bull markets, bear markets, rising interest rates, falling interest rates, and the increased number of finance-related articles with conflicting views in the press can make creating and following a financial path difficult.
- There are more financial options. Hundreds of credit card options, several types of mortgages, different types of IRAs, and the ever-growing number of investment options further complicate financial decision making.
- There are more choices of financial services companies. Banks, credit unions, brokerage firms, insurance firms, credit card companies, mortgage companies, financial planners, and others are all trying to get your business.
- The numbers themselves seem to have gotten larger. Costs and wages have generally continued to rise to the point where having an income or retirement nest egg that several years ago would have seemed luxurious, now just seems barely adequate.
Taken together, many people today are feeling a high level of financial anxiety and are looking for answers. Unfortunately, there are no guarantees or easy answers. However, there are several things you can consider to help relieve your financial anxiety.
- Be as informed as you can be about your finances. After all, you are the one who is going to have to live with your decisions.
- Try to find a financial institution or financial advisor that is knowledgeable, that you can trust, and with whom you can work comfortably. They cannot make all your decisions, but they should be able to help you put your situation into perspective and help you evaluate your options.
- Try to develop good financial habits. Just paying attention to how you spend your money will probably lead to some ideas about how to save more. Over time, your savings can make a large difference in your future financial lifestyle.
- Do the easy things. Participating in your company’s retirement plan, contributing to an IRA, starting to save early for a college education, enrolling for direct deposit of your paycheck, and using some form of automatic saving plan will help you accumulate funds. In addition, you will know you are taking positive actions.
- Try to develop a financial plan of some sort. It does not have to be complicated or extensive. In fact, you may want to tackle one part of your finances at a time, such as looking at all your insurance needs. Breaking up a financial plan into smaller, workable pieces can make it easier to create.
- Research credible sources. Your BB&T Branch Banker and BB&T's Learn and Plan are great places to start.
It is never too early or too late to improve your financial literacy. In fact, if you avoid major mistakes and do some of the most basic things, you may find yourself on the road to controlling your financial future with significantly less financial anxiety.