(apologies for the funky formatting)
From Wikipedia (don’t tell my students I quoted Wikipedia!): “Financial literacy is the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.”
Before this was an actual term, my mom was financially literate. As a woman of color she set a clear example of what it meant and why it was so important to be financially literate. My mom made money, she invested money, she saved money, she loaned out money, she gave money away and she very wisely spent money. I grew up under the impression that we were wealthy. And our friends thought so also. If I had an Economist or financial planning person actually look at our assets, income, expenditures, etc. while growing up I think that person might more accurately say that we were middle class (maybe upper middle class). But the point is my mom, a woman who did not conform to the standard norm of women of her generation, was financially literate.
It is important for women, people of color, and young folks to be financially literate. We need to engage in those practices AND pass it down to our children, nieces and nephews, grandchildren, etc. Here is what I have retained from my mom’s financial life (I’m sure she died truly believing I’d learned nothing about money)!
My Financial Literate List in no particular order:
- Read about money.
- You must be an informed participant in your financial literacy.
- At first I was bored and confused, but over time the money language became familiar to me and I began to understand it more and more.
- Reading about it helps to make what can be confusing more clear. I also talk to people who know more about money than I do.
- Find an institution that suits your needs, lifestyle and personality.
- My friends on Facebook know how disgruntled I got with my BIG bank and I reached out and asked for suggestions. There are lots of options out there – credit unions, virtual banks, etc. You may use a combination of institutions or just one.
- Having a realistic budget and living within that budget is important.
- That savings plan should include money for holidays (Christmas), birthdays, anniversaries, vacations, and expenses related to children (if applicable – field trips, etc.)
- I have found that having a couple of different savings accounts has helped me do this well.
- 401Ks and pensions
- Real Estate, even though the market fluctuates, it’s always good to own a piece (or more than 1 piece) of property
- My mom gave to the usual suspects (charities and church), but she also gave to friends; not always loans, but gifts. I think it was karma for her – what she put out she got back.
- Plan for emergencies.
- The conventional wisdom says save at least 3 months of salary; and
- Think about: (a) if you’re a home owner, stuff breaks; (b) if you own a car, it needs TLC; (c) if you’re a parent, kids always have unexpected expenses, even when you plan
- Have friends with similar saving and spending habits.
- My mommy friends and my friends who grew up with “less than enough resources” are my best guides for my saving and spending habits. Through where we choose to go to lunch (or whether we brown bag it) to how often we go to exchanging kid’s clothes, etc. my like-minded pals keep me in line
- I also have 2 friends with extremely cheaper life styles than I, they give me perspective and make me think twice before I make a purchase.
- Spend, wisely.
- In your efforts to budget, save, invest, etc. don’t deprive yourself or else you might find yourself on a spending binge.
- The cliché is that the apple does not fall far from the tree. My mom was a spender. She LOVED fashion and she spent well on clothes. I’m not a fashionista but I love books, magazines, yarn, and Starbucks. So I budget for those expenditures and then treat the process of purchasing one of those things like a treat-day (I leave the boy child at home with daddy and buy a latte, go get my nails done, etc.)
- Be consistent.
I think my momma might be slightly proud that I could actually articulate 10 things about financial literacy. Do you have any tips for financial literacy? Please share!