Financial Literacy An Overview

“Competency in managing money appears to be a skill that doesn’t come naturally to everyone. Unless a person is exposed to the practice of money management, he or she is less likely to understand how it works and its long-term benefits. It is easy to develop poor spending and financial habits that result in significant negative consequences such as a poor credit rating, denial of credit, rejection for a checking account and bankruptcy, to name a few. Early financial literacy is the best way to pre vent such consequences.”

From the Federal Reserve Bank of San Francisco, “Financial Literacy Resources” publication

Financial literacy is a bundle of skills that have to be learned continuously throughout one’s life.  As a person’s overall money management tasks become more and more complicated, we as consumers must understand not only how to do the basics, but also understand and master more complex financial transactions.   This range of needed money management knowledge includes:

• Opening a credit account – knowing about personal credit reports and “FICO” personal credit scores.
• Setting up a household – basic budget management, checking accounts, electronic banking (such as direct deposits).
• Buying or leasing a car – choice of new or used car, lease or purchase, insurance, registration.
• Purchasing a home – obtaining one or more mortgages, insurance, prime/sub-prime (rate) loans, closing costs.
• Investing your money to build wealth – Certificate of Deposits, saving accounts, money market accounts, investing in mutual funds, or individual retirement accounts (IRAs).
• Protecting yourself against fraud – and the predators who practice predatory lending, pay day lending, identity theft.

This section provides information and links to scores of government, social profit (non-profit) and private sector educational programs that are focused at helping you and your children or members of your family become “financially literate” or knowledgeable about personal money management and “asset” building.

We invited questions, comments and suggestions.  Please send your questions to: finance@communityinvestmentnetwork.com