Financial Education: What It Means and Why it Matters

lady putting money into a piggy bank and using a calculator
Why is financial education so important?  Americans on average fall just below “Good” on their Credit Score, and thirty-three percent of adult Americans have no retirement savings. Eighty percent of Americans are in debt, with the average household in about $16,000 of debt.

So what seems to be the problem?

Unsurprisingly, there is some debate on the best method for saving, spending, and paying off debt, but regardless of the plan, most Americans fall short when they do not maintain one at all. BMI Federal Credit Union Financial Education Manager and Certified Financial Education Coach Nancy Sullivan Graf says:

“There are several components to financial wellness, and everything really comes down to making a plan.”  To most of us this means a budget – how we limit our life choices to meet our capabilities. However, Nancy takes it a step further:

“Think about creating a realistic life plan, rather than a budget.” says Nancy, “The three elements to a savings plan should include your emergency fund, your retirement, and your dream”. This theme is introductory in most of our Community Workshops at BMI Federal Credit Union.

Where to Pay Attention

We may not always have the ideal life circumstances, such as the desired income, the perfect job, or the good fortune, but everyone can take these steps to improve their financial lives.  If you doubt your circumstances, there are some guidelines – signs in the road toward your financial wellness destination. 

Credit Cards

Credit cards are a great way to balance large purchases, to help you in an emergency, and when used properly, to build credit. Yet how do so many people get into credit card debt? Overspending is an easy answer. It can be tempting to borrow more money than you have. It can create bad habits, especially if you’re a procrastinator or an impulse buyer. Another dangerous move is only paying the minimum due each month. Interest is calculated as such that only paying the minimum balance on your bill multiplies both the time it will take to pay off the card, as well as the amount owed.   

“The simplest way to begin to eliminate your debt radius is by sticking to your plan.” says Nancy. For some that means first paying off the card with the highest interest, while for others it could mean first paying off the lowest balance. Whatever you choose, commit to it. 

Credit Scores

Credit Scores are a critical component to your financial health. There are simple ways to grow and improve credit, and simple ways to hurt it. A blemish on your Credit Score lasts seven years. You may have had some misfortune in your day, or you may have simply had a few bills lost in the mail. An important tip to remember when dealing with your bills, is that it is exponentially easier for a company to report an unpaid bill than it is for you to reverse a mistake. Companies lose no money or sleep by reporting any owed money to a creditor. These creditors can harass you for years, and the longer they’re denied, the longer they can “renew” your bad debt. Do not bring your ego to a battle with a billing company.

Emergency Funds

Create a successful emergency fund by following two important rules: Pay yourself first, and automate those payments. To pay yourself first means that no matter your bills, paychecks, or disposable income, always contribute toward your emergency fund come pay day. Even if it seems ineffectual, pay yourself regularly, and automate those payments. Establish a direct deposit into your savings account.
“Treat your emergency fund like a bill that is due each month,” says Nancy, “with a payment plan that does not involve will-power.”

To Sum It Up

Sound financial wellness is a defensive game. We are not always dealt a good hand, but have more control than we think. A good start to improving your financial circumstances is education. You can learn more about the BMI Federal Credit Union Financial Education Program and our Community Workshops on our website. Community Workshops are free and open to the public, and are designed to teach a variety of the most in-demand topics. You can book an appointment to speak with a Certified Financial Counselor one-on-one, and visit our Savings and Certificates page to explore your long term savings options. Put yourself back in control of your finances: Make a realistic plan you can maintain, and don’t shy away from financial education.