As April’s Financial Literacy Month comes to a close, it’s a good time to review tips for consumers to improve their financial literacy.
Many consumers reach adulthood with no clear understanding of financial literacy. Creating budgets, making smart investments and financial planning for the future aren’t often taught in high school or even college in some cases.
Financial literacy may seem like a broad and intimidating topic, encompassing many different goals, including the ability to meet current financial needs, saving for your financial future, the ability to absorb a financial shock, and having the financial freedom to make choices and enjoy life. As a consumer, it’s important to be financially literate when it comes to investments, savings accounts and budgeting, and find a plan that works for each person. Financial literacy isn’t a cookie-cutter, one-size-fits-all plan. Everyone is different and will have their own unique set of goals to reach.
Use BBB’s tips to improve your financial literacy:
- Guard your personal information. In today’s digital world, protecting your personal information goes beyond shredding sensitive documents. While collecting, storing, and disposing of sensitive documents goes a long way in preventing identity theft, consumers must also evaluate their digital footprint. Consider setting up multi-factor authentication systems on your most sensitive accounts, such as your online bank, utility, insurance and medical accounts. Properly disposing of electronic devices can prevent scammers from accessing the data stored on the hard drives and is a modern equivalent of shredding services.
- Create and stick to a budget. Following an organized budget, whether weekly or monthly, can pay dividends in the longevity of your financial well-being. Particularly for young adults, practicing budgeting can increase confidence, self-esteem and independence. Parents can help their children establish healthy financial habits by setting up a regular allowance or budget and by discussing their expected expenses. Once a child begins making an income of their own, they can apply the budgeting lessons learned to their finances.
- Understand the dangers of debt. As tempting as it may be to purchase the latest, greatest product using a credit card or payment plan, debt can quickly spiral out of control. Take the time to understand the terms of any loans, credit cards, rent-to-own or deferred payment options offered by a banking institution or company. Review the payment's annual percentage rate (APR) and know whether it’s fixed, simple or compounding interest. Understand your debt-to-income ratio by adding up all your monthly debt payments and dividing by your gross monthly income.
For more tips on financial literacy from BBB, visit BBB.org. And if you spot a scam, whether you have lost money or not, report it to BBB’s Scam Tracker at BBB.org/ScamTracker and the FTC at ReportFraud.ftc.gov. Your story can help other consumers avoid similar scams.