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Have financial literacy efforts in America been successful?

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Guest Contributor

Lionel Shipman Owner - Shipman Consulting

Lionel Shipman
Owner – Shipman Consulting

Lionel Shipman is the owner of Shipman Consulting, a personal and business finance-consulting firm specializing in helping individuals and businesses improve their financial outlooks. The primary focus of the firm is facilitating seminars and classes to educate, motivate, and empower people to take charge of their financial lives. The firm also offers one-on-one consulting services.

Please visit the firm’s website for information at WWW.ShipmanConsulting.Com.

Email address: Contact@ShipmanConsulting.Com ; Twitter: @LShipmanSC

 

 

We’re Celebrating Financial Literacy Month

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Know Your Money
Tuesday – April 22, 2014

Knowing Your Personal Finances
Have Financial Literacy Efforts In America Been Successful?
By Guest Contributor
Lionel Shipman

Seeing that this month is Financial Literacy month, I thought I would repost this article with some updated information. A couple of years ago, I was asked to address a financial question that has affected many consumers across America. I thought this question was very interesting and wanted to share it with my readers. Below, I have paraphrased the question, along with my response, and provided some updated information.

Have financial literacy efforts in America been successful?

My response: It depends on how one would measure success versus failure. Regarding financial literacy, I believe failure can be measured by the number of consumers who are enduring the consequences of bad decisions. Success can be measured by the number of bad decision-makers changing their ways in a positive direction and applying some basic money skills with financial transactions. With the past economic downturn and the continued after shocks, many consumers have been enduring the consequences of financial mismanagement and ill-informed or uninformed decision making. As a result of these decisions, a large number of people faced and some continue to face foreclosures and bankruptcies among other financial heartaches. A lot of these people made bad financial decisions, whether the decision was the refusal to live on a budget, the steady accumulation of debt or signing loan documents without fully understanding the terms and conditions of the obligation. Even today, according to an article by Fortune Magazine dated February 18, 2014, consumers are taking on significantly more debt than they have in recent years.

However, there are a number of people who did not succumb to the easy access of credit and refused to enter into an obligation with a bank or financial institution, even though they understood the terms and conditions. Some of these people have been financially bruised in the past and now their future decisions are well thought out because of their financial knowledge and experience. Even though there are people who will never learn the “financial” lesson, some have not only learned the financial lesson, but they are teaching others how to manage their finances soundly. Sadly, there were a number of financially savvy people, who made bad decisions and unfortunately, it cost them greatly. They acquired the financial education and experience but somehow did not apply it to their financial decisions. As the old adage states, the bigger they are the harder they fall. Unfortunately, the fall greatly impacted their financial well-being, which in turn affected many other people.

There are some hindrances that could affect the measurement of successful efforts of financial literacy such as the scarcity of financial education in certain instances and accessibility of financial education. There are a number of financial programs that aim to teach and instruct people with their personal finances. But, many people are not able to attend those programs for a variety of reasons and many are not aware that the programs even exist. Also, some people find no practical value in the financial programs. It does not take a college graduate to learn the basics of money management. Educating oneself regarding money and money management is open to everyone. But, every individual must make the decision to learn and must be willing to learn.

There are many outlets from radio programs and television shows to seminars and books that emphasize the importance of financial education with topics ranging from basic money management to investing. However, some people are ignorant (unlearned) of the importance of financial education and some just blatantly refuse to learn even when it is at their fingertips. There are people who would rather spend their money on entertainment or personal things as opposed to establishing an emergency account, savings account or retirement account. Some people are more concerned with looking good, driving well, and living large as opposed to utilizing a budget and becoming debt free. I believe if more financial education was offered to the masses at an earlier age, like other things in life, people would operate their financial lives more efficiently and maybe the economic downturn would not have been so devastating.

I have often stated that the economic downturn was brought on by consumers, companies and government. (1) There were a number of consumers who were getting into loans or establishing credit without fully understanding the terms and conditions. (2) Then, there were a number of companies who were marketing credit products to the masses as opposed to those who really understood the terms and conditions and had the income and cash flow to support debt obligations. (3) And lastly, some government agencies failed to properly regulate credit/lending products of various financial institutions. These agencies also failed in properly managing complex financial transactions of various financial institutions. Therefore, all three can share some responsibility of the economic downturn. Unfortunately, consumers paid the biggest price.

Going forward, consumers need to be better prepared and informed when making financial decisions. Consumers need to be more educated regarding money and money management. Financial responsibility should not lie with companies and government alone. Consumers must take the initiative in educating themselves by enrolling into financial classes and/or attend financial seminars to increase their knowledge and understanding of money and money management. Consumers should spend time reading financial magazines, newspapers and articles. Then, they must apply that knowledge and understanding to their financial lives. Knowledge is power. But, applied knowledge is powerful. If you do not understand something, ask questions until you do. Then, if you still feel uncomfortable, consider walking away. There are always other options available. Every day is an opportunity.

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