Financial literacy is the bedrock that supports financial life management. More than knowing the difference between stocks and bonds, or understanding your appetite for risk, financial literacy is what lets you make trade-offs today for the goals that are important to you. Financial literacy lets you imagine the future you want and say, “It’s possible.”
We see a chronic, critical need for financial literacy education. The lack of financial understanding leads to a cascade of consequences throughout people’s lives. The Federal Reserve estimates 4 in 10 adults could not cover a $400 emergency without having to borrow money or sell their belongings. The same study shows less than two-fifths of adults believe their retirement savings plans are on track… and 1 in 20 non-retirees have borrowed money from their retirement accounts in the past year, in spite of the penalties and loss of potential compounding interest.
We shouldn’t write off this trend as a lack of personal responsibility. The shift from pensions to 401(k)s, ballooning healthcare costs, and other systemic factors have changed the financial “rules” faster than many consumers can keep up with. This is why financial literacy education is more important than ever: it yields stronger financial decision-making abilities, smarter consumers and a more engaged workforce.
The Financial Industry Regulatory Authority (FINRA) has quantified the profound benefits of an early grounding in financial literacy. It found states that implemented K-12 financial literacy education mandates, over time, produced young adults whose credit scores improved by as much as 31 points, and curbed severe delinquency in paying bills by as much as 32%. In other words, it positions young adults to build a sound financial foundation to achieve lasting financial independence and realize their dreams.
Financial Literacy Month spotlights a subject dear to our hearts. Facet Wealth fights to make high quality advice more affordable and accessible for main street families every day. We built our business from the ground up to lower the cost barrier to financial planning services, and we saw an opportunity to do even more through a partnership with EVERFI and the Southwest Baltimore Charter School.
Facet Wealth will pledge quarterly donations to help EVERFI and the school fortify its curriculum of financial education for their fifth graders. EVERFI’s financial education software and the leadership of SBCS will instill in the school’s students the fundamental skills of financial literacy that will benefit them for the rest of their lives. These donations come from 100% of the commissions we earn from our clients’ insurance products.
Insurance is a critical component in ensuring a family’s financial life, as it helps secure wealth and protect one’s livelihood, but the core of our business model is flat-fee, subscription-based planning service. By donating insurance commissions, and as fiduciary stewards, we can satisfy our commitment to unconflicted, objective advice for the households we serve and give back to the Baltimore community and the next generation of its residents. We’re proud to do our part to help children gain the financial skills they need to become savvy decision makers in the long run.