Top 10 reasons financial education now more important than ever

Top 10 reasons financial education now more important than ever

Eileen St. Pierre, The Everyday Financial Planner

As I sit down to write this column, there is one word I can’t seem to get out of my head – uncertainty. Whether it’s the economy, the housing market, health care reform, budget deficits, or taxes, people are uncertain about how things will turn out in the near future. Uncertainty breeds fear. People become afraid to take on risk. We need people to take on risk in order for the economy to recover. We need people to think long-term.

How do we break this cycle? Financial education is the key. A person with a sound financial education understands the tradeoff between risk and return and becomes more forward-thinking. The first step is determining how much risk you are willing to accept. For that given level of risk, you expect to earn a certain return. The more risk you take, the greater your expected return. You may end up earning more or less than the expected return over a given time period, such as a year. But in the long-run, if you make this particular investment, your objective is to make your expected return. You then need to do your homework and find out all you can about this investment. I remember reading that more millionaires were created out of the Great Depression than at any other time in our nation’s history.

Here are my top ten reasons why financial education is now more important than ever:

10. Shopping online is addictive. Grandma was right – if you don’t have the money, you shouldn’t buy it.
9. What the heck are mortgage-backed securities, and why should I care?
8. Credit card companies and financial institutions will always come up with great ideas for new fees.
7. The retirement age continues to go up.
6. You can now get a payday loan without leaving your house.
5. Those two dreaded words – corporate restructuring
4. I owe how much on my student loans?
3. I had no idea when I signed up for my 401(k) that I had to know how to manage it.
2. Oh that’s right, asset prices don’t always go up.
1. OMG, I’m responsible for my own financial security!

There are plenty of financial education opportunities out there. The most frustrating thing I hear from my peers is that no one shows up for their educational programs. I have never heard anyone say that they felt a financial education program they attended was a waste of time. You’ll be surprised at what you will learn if you just show up.

You can start by visiting my Basic Financial Management page.