What Does Financial Literacy Mean to You And Why Is It Important?


First, let’s start with a few sobering financial literacy facts:

  • Over 50% of Americans live paycheck to paycheck1
  • 20% of Americans don’t save any of their annual income for retirement2
  • Americans hold over $1 trillion in credit card debt with an average interest rate of 17.89% for new cards and 14.52% on existing cards3

Financial knowledge doesn’t happen overnight; it’s a life-long process. The ability to understand how to make sound financial choices so you can confidently manage, help protect, and try to grow your money is important for everyone. For those at or near retirement, financial literacy is essential, and the effects of not being educated when it comes to your finances are detrimental.

The importance of being financially literate may mean different things to all of us. However, at its core is the ability to allocate your income toward various goals simultaneously – beyond recurring expenses and to retirement savings, paying off debt, and boosting a rainy-day fund.

The pandemic has caused many to reflect on their financial situation and look closely at their financial habits. According to a recent poll conducted by the National Endowment for Financial Education, 88% of Americans say the COVID-19 crisis is causing stress in their personal finances. If you lost your job, as many near-retirees have, the stress is exponentially higher. 4

These obstacles create an opportunity for all of us to improve our financial literacy. The greatest generation of savers this country has ever seen was a product of the Great Depression. This is no coincidence. The Great Depression helped shape that generation’s perspective on money. It created a desire for greater financial security and a desire for financial literacy.

Are You Financially Literate?

Financial literacy is the ability to make informed judgments and effective decisions regarding the use and management of money. It is all about financial awareness and financial knowledge.

The pillars of personal financial literacy include:

  • Budgeting Creating a budget and living within your means is one of the most basic aspects of staying on top of your finances. Effective budgeting promotes accountability and increases one’s awareness of spending patterns, thus minimizing excessive or unnecessary spending.
  • Saving  Saving is one of the most important aspects of maintaining a healthy financial situation. Buying a house, traveling, starting a family – most of the lofty goals Americans have in life involve big financial purchases. However, accomplishing these goals becomes much more difficult without saving.
  • Investing  Successful investing requires learning how to make your resources work for you to achieve your financial goals. To invest effectively, you must understand the ways to invest (e.g., stocks, bonds, commodities), the inherent risk/reward, and the importance of diversification. Financial literacy is paramount when it comes to retirement planning.
  • Understanding Credit/Managing Debt  Effectively managing debt is as crucial to establishing a good credit score as understanding the difference between good and bad debt.
  • Paying Bills  Although seemingly rudimentary, it’s important to have a routine established to pay your bills and pay them on time.

Ideally, financial principles are developed in the home, taught in the classroom, and practiced throughout life. Yet few states offer classroom instruction on basic financial knowledge.

How do you become financially literate? That’s a great question, but it doesn’t have a magic solution. Financial literacy isn’t something that happens overnight. Lifelong learning, building upon a foundation, and expanding our knowledge base is fundamental.

  1. Survey: 53% of Americans Live Paycheck to Paycheck – MagnifyMoney
  2. Bankrate: 65% of Americans save little or nothing (cnbc.com)
  3. 2021 Credit Card Debt Study: Trends & Insights (wallethub.com)
  4. National Endowment for Financial Education

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Carter Financial Group is a full-service financial firm dedicated to helping those in the Texas area meet their long-term financial goals. Our team of financial advisors and wealth managers are experienced in helping clients preserve their savings, so they can use it as a source of steady income in retirement.

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Carter Financial Group and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification, and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Insurance products are offered through our Affiliate Advisors Academy LLC.  Carter Financial Group and Sound Income Strategies, LLC are not associated entities. Carter Financial Group is a franchisee of Retirement Income Source. Retirement Income Source LLC, Sound Income Strategies LLC, and Advisors’ Academy are associated entities. © 2023 Carter Financial
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About Mandee

In preparation for continuing the family business and taking over full-time once Dee retires, vice president and Associate Advisor, Mandee Carter, has been working with her father and learning the ropes since 2017.

Mandee received a BS in Psychology in 2016, but began her career in financial services six years before that when she started helping in the office. After acquiring her degree, she came on full-time in March 2017 as Dee’s business partner and main Associate Advisor helping clients navigate the intricacies of successful financial planning.

In 2021, she was named an Elite Producer with American Equity.

In Mandee’s spare time, she likes to go to the gym and spend time with friends and family. She is an animal lover and has two German Shepherds, both rescued from a shelter. She enjoys meeting new people and helping clients.