3 Key Takeaways from Financial Literacy Week
Financial literacy week is one of our favorite weeks of the year. During this time, we unite experts in the industry to share tips, tricks and general knowledge about managing finances in a week-long digital event. Our experts cover everything from mortgages, paying off debt, saving for retirement and more.
The virtual event is a full 5-days and is broken up by key topics such as financial foundations, homeownership and family finances – all of which we can’t cover in this article, so feel free to check out all the free content afterward.
Headlined by best-selling author, speaker and CEO of Clever Girl Finance Bola Sokunbi, this year may have been one of the best yet. In case you missed it, here are some of the key takeaways from 2022 Financial Literacy Week.
Discipline is a key ingredient for success
Several of our speakers mentioned the importance of discipline when it comes to achieving short, medium and long term financial goals.
Now, ‘discipline’ can be broad word – here are some examples of exhibiting discipline in relation to managing finances:
- Creating a budget, and sticking to it. Building a budget may feel like an overwhelming task, however, seeing funds come and go provides greater transparency into what is blocking you from achieving your financial goals
- Pay down existing debit as a priority. Debt comes in a variety of forms – student loans, car payments, credit cards and mortgages. The more debt you incur, the more difficult it will be to achieve other financial goals, which is why prioritizing paying down debt is important
- Establishing a ‘rainy day fund’, requires a lot of financial displinte but can unlock a secure financial future. According to a 2020 Bank Rate survey, 40% of Americans would borrow money to cover a $1000 emergency (e.g a car accident, medical emergency, urgent home repair) – a scary statistic given the unpredictability of life. Establishing an emergency fund can feel overwhelming, or tempting to pull from, however, it will keep you grounded if anything unexpected were to happen
- Look for secure investments such as bonds, dividends and money market accounts and familiarize yourself with the pros and cons of each. Avoid high risk investments such as NFTs, unpredictable IPOs or timeshares
Talk to your kids about money
Learning about taxes, wages and the complexity of personal finances is often brushed off in the classroom. Therefore, if you are a parent or guardian, teaching your children about money management can provide them a life skill which will set them up for a brighter financial future.
Conversations around finances can shape your child’s relationship with money – and you don’t need to be an expert to have these conversations. The opportunity to teach a child about the value of a dollar can come up naturally in everyday life.
For example, if you’re in a shop and your child wants something, explain to them that everyone has limited money therefore we need to be selective about what we spend it on. It’s a good chance to explain needing vs. wanting, and talk about how your family earns money in exchange for items such as clothes, cars and housing. Making the most of these moments will teach them good spending habits for adulthood.
Avalanche and Snowball aren’t only used to describe types of snow
As mentioned, debt can occur in a variety of forms. Additionally each of those forms have different consequences for delayed or partial payment, which is primarily driven from interest rates.
Interest rate is the amount of money you pay to the entity you’re borrowing from on top of the money you borrowed. For example, you may take out a home loan at 5% interest from a bank. That 5% will be added onto your monthly repayments, which is how the bank makes money. The longer it takes you to repay the money you borrowed, the more you’ll end up paying the entity you borrowed from – in this example, the bank.
Managing loan payments can be done with the right strategy in place. In Financial Literacy week, we learned that there are two methods that can be used in paying down debt, the avalanche method and the snowball method. Both strategies have pros and cons and will require research to find out which one is right for you.
The Avalanche method is a more aggressive approach which involves paying extra money towards the debit with the highest interest rate. While the Snowball strategy involves paying down the smallest debt first and working up towards larger debts – regardless of what the interest rate is on the loan.
The Avalanche method is more efficient for debt reduction, but requires more discipline. While the Snowball method does not reduce debt as quickly, it can allow more flexibility if you’re not equipped to pursue the Avalanche approach. Both strategies, however, can reduce debts and provide more financial freedom.
Financial foundations isn’t a skill that is gained overnight
It can take some time to budget, learn and execute strategies to improve your financial health and it doesn’t happen immediately. Habitat for Humanity is one of many organizations that offer a variety of free resources that can help support your journey to financial literacy. If you need help getting started, explore our Financial Literacy videos from this year’s event.