Economics and Savings in America
- Most Americans do not go through basic personal finance classes in school.
- Nearly half of all retirement-age Americans have no retirement savings.
- More financial education is key so that adults, young families, and youth better understand the basics of personal finances and financial planning.
Personal finance can be an intimidating endeavor for a lot of Americans. However economic literacy is essential for those who are tired of living paycheck to paycheck and desire a more comfortable financial future. Some of the basics of personal finance include being able to budget monthly expenses, saving for the future, and knowing how and where to invest your savings. Unfortunately, the average American struggles with these tasks.
How Americans are Flunking Basic Economic Education
Let’s start where most Americans are getting their economic education — at home. The majority of Americans do not go through basic personal finance classes in school. In fact, a personal finance class is only mandatory in 17 states. That leaves this responsibility solely in the hands of each individual and family to educate themselves. Unfortunately, that approach hasn’t proven to work very well.
Money management is not something that the basic economic education in schools provides, and that is partially where the problem lies. Personal finance is one of the most important areas of our lives, so why isn’t that topic taught in more schools? If each American was provided with a class, or even a whole year in personal finances and budgeting before graduating, would they be more equipped to budget, save for the future, and deal with the real world economic issues they will face? It certainly wouldn’t hurt their chances.
Economic literacy would be more common if personal finance and economic education were better implemented prior to entering the real world. In a recent poll by Job Creators Network, 75% of Americans underestimated how long it would take to pay off $5,000 in credit card debt if they only paid the minimum. Is it any wonder why the majority of Americans struggle with their finances?
Americans Have Little to no Savings
According to the GAO, nearly half of all retirement-age Americans have no retirement savings. Although an improvement from the last report, the numbers are still bleak. Based on those numbers alone, it is pretty clear that Americans need improved economic education.
Saving is one of the most basic principles when it comes to managing finances, but it’s not a common practice. One survey of 5,000 American adults found that 58% had less than $1000 in savings. With so many Americans seemingly living paycheck to paycheck, retirement and any sort of rainy-day fund is far from reach.
The numbers get even more bleak when they are broken down by income level. Both the lowest 20% and 20%-40% income segments of American households have a median savings of 0 dollars. Unsurprisingly, higher income households generally tend to save more. Do household savings of the lower and middle class speak to the economic crisis that America is facing? It’s hard to argue otherwise.
Aside from Americans’ inability to save, there’s also a debt crisis affecting most Americans. Its reported that 3 in 10 Americans actually have more credit card debt than emergency savings. These trends are leaving more and more Americans completely reliant on Social Security as a safety net when they retire. This is bad for seniors and the trend doesn’t appear to be changing any time soon.
While most know the “American Dream” as buying a house and retiring by age 60, that is no longer the case. More Americans aren’t buying homes and even more are being forced to work beyond the age of retirement because they can’t actually afford to retire. This is a problem that is directly connected to the lack of financial education that’s impacting all ages and generations in America.
How do we address the problem? More education is key so that adults, young families, and youth better understand the basics of personal finances and financial planning. Teaching them sound strategies will help them earn more, save more, and better plan for their future.
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Image Credit: Photo by Mathieu Turle on Unsplash