New Times Demand New Levels of Literacy

Not too long ago, achieving the American dream was a sure shot. You worked for twenty to thirty years, put some money aside, and retired with a hefty pension and medical coverage. There were no doubts you’d be able to buy a home and send your kids to school. Everything would inevitably work out if you just worked hard. This philosophy worked for much of the 20th century, but when technology and globalization came along, many of our biggest companies struggled to keep pace. As large corporations worked through their challenges and retooled to become competitive in a new landscape, they realized their defined benefit plans and generous healthcare packages needed to be eliminated or significantly scaled back. Recognizing the effects of a long-term commitment to defined benefit plans, new companies that sprung up to lead America’s recovery in the 21st century chose not to offer the generous benefits packages. In response to these changes, financial literacy became a buzzword in the mid-1990s. Many of today’s leading organizations in financial literacy, such as the National Endowment for Financial Education, were formed to help Americans learn how to manage, save, and invest their money. While that’s only the CliffNotes version of when the responsibility started to shift from employer to individual, it gives you a glimpse into how and when the tides began to turn.

Now fast forward to a President who wanted to privatize Social Security, then to a ton of corporate scandals, through the tech bubble of 2001. Finally, we arrive at the present day where only 14% of Fortune 100 companies offer a traditional pension plan, Social Security and Medicare are under review, and financial products are more complex than ever.

In today’s climate, financial literacy is not just important; it’s absolutely mandatory. Money plays a major role in virtually every decision of our lives. By understanding how it works, you increase the odds of making the best possible decision for you and your family. Think about all the bad financial decisions you’ve made. How many of them could have been avoided? Illiteracy may not have been to blame for all your bad decisions, but I am certain the more financially literate you are, the less likely you are to make decisions that are detrimental to your financial present or future.

Long gone are the days when knowing how to compare interest rates on bank loans and savings accounts is enough. There are financial predators that prey on ignorance and they don’t all look like Louie the Loan Shark. The victims of predatory lending and Madoff’s $50 billion Ponzi scheme can tell you that. The effects of our financially illiterate society are all around us, and you don’t have to go far to hear “Only if I would have known…” or “I wish I would have known…”

Today, it’s not enough to know. As we learned from the famous GI Joe PSAs, “Knowing is Half the Battle.” Being financially literate means, you know the how-to and the how-come. It’s one thing to know that paying your bills on time has a positive effect on your credit, but it’s another level of understanding when you can list the five components of your credit score and discuss the role payment history plays in calculating it; our current financial system requires the latter