Several years ago, I had the privilege of collaborating on a financial literacy program with USA Today and the Basketball Hall of Fame. Cambridge worked with school systems around the country, ultimately helping prepare 160,000 students for life after high school. During one of the financial literacy rallies Cambridge conducted for Boston students at the TD Garden, Celtics Hall of Famer Jo Jo White said something that stuck with me, and many of the 1,000 students in attendance, “You pay for what you don’t know.” Since April is national Financial Literacy Month, we thought it would be appropriate to take a look at how the lack of financial literacy hurts businesses, consumers, children, and ultimately, our economy.
Now, I’m sure the mention of businesses may have raised a few eyebrows. How are businesses affected by the lack of financial literacy? Plenty! American businesses lose close to $210 billion dollars each year as employees struggle to deal with personal financial issues. One in four employees is seriously financially distressed. On average, up to 80% of distressed employees spend time at work dealing with their personal financial issues. How much time? Anywhere from 12 to 20 hours per month. Some companies have taken a proactive step and offer lunchtime workshops on a variety of personal finance issues. Groups like the Society for Financial Awareness, or SOFA, provide free financial literacy workshops to businesses and other organizations. If you are a business owner or human resource professional, you owe it to yourself to learn more about SOFA by visiting sofausa.org.
Obviously, financial stress is a tremendous issue to tackle, but it’s far worse than many of you may imagine. According to the American Psychological Association’s 2010 Stress in America survey, 76% of Americans say money is the most significant cause of their stress. Emerging research has been tracking the phenomenon of self-deprecation over societal influences, and paints a stark picture. When we ruminate over things we can’t control, we needlessly suffer from depression, anxiety, and disassociate ourselves from friends and loved ones alike. Many people have discovered that they can successfully alleviate stress by regaining their sense of financial control, which becomes possible when you take a moment to reevaluate your relationship with money. One of our greatest gifts is the ability to adapt, but we rarely do so in the face of a financial challenge. Instead, most consumers tend to repeat the same spending patterns that got them into trouble in the first place. You can alleviate your stress by talking with a financial professional at one of the many non-profit credit counseling agencies in America. To find an agency near you, please visit one of the industry’s trade associations. The Association of Independent Consumer Credit Counseling Agencies website is located at AICCCA.org, the Association of Credit Counseling Professionals is at ACCPros.org, or you can visit the National Foundation for Credit Counseling at NFCC.org.
One of the greatest needs for financial literacy is in our school systems, but the subject has never been a priority in education. However, the circumstances leading up to the recent recession indicate that the need for young adults to understand the fundamentals of personal finance is more important than ever. For instance, many kids drop out of school without understanding the impact such a move will have on their long-term financial stability. Despite the early jump on entering the workforce, a high school dropout earns, on average, about $260,000 less than a high school graduate. In fact, each year’s class of dropouts cost the country over $200 billion in lifetime earnings and unrealized tax revenue. Furthermore, the per-capita costs of high school dropouts suggest that their failure to obtain diplomas costs the public sector about $125 billion in lost revenue each year. Organizations such as Junior Achievement teach students the key concepts of financial literacy, work readiness, and entrepreneurship. I’ve seen first-hand how JA helps transform at-risk children into high school graduates, and I recommend you visit ja.org to locate a Junior Achievement program in your area.
For now, if you’re still paying for what you don’t know, imagine the benefits of one day earning based on what you do know. You can get there. However, that means we have to start doing a better job of preparing ourselves, our friends, neighbors, and families to make informed financial decisions. That’s what Financial Literacy Month is all about – learning and earning. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.