In our part one of the costs of financial illiteracy, we looked at the story of R. Kelly a popular R&B singer to emphasize America’s lack of knowledge concerning budgeting and saving. We continue exploring this problem by looking at the Literacy Project.
The Literacy Project s a nationwide organization that works to address and fix America’s financial illiteracy. Recent statistics show that the number of Americans who are “functionally illiterate” (Meaning they can read enough to live and work independently) may be closer to 45 million. Included in this staggering fact is that 50 percent of American adults cannot read a book written at an eighth-grade level. This is a sad commentary of our society.
In part 1, I mentioned that the second definition for illiteracy was very interesting. What I mean by that is when you consider; showing a lack of familiarity with the fundamentals of a particular field of knowledge in that sense we could all be considered illiterate. The keywords here though are “lack of familiarity.” knowing and learning how to read exposes you to such a wide range of knowledge and understanding of words, that a literate person will have some level of familiarity with any field. Even if it is recognizing some of the terminologies. Which is enough to remove you from the definition of illiterate. Aren’t you glad you can read? If at all possible pass that gift on to another, because believe me, illiteracy is closer to you than you think. A good resource is The Literacy Matters Foundation, they are doing a great service and can use all the help they can get.
Just as sad is the fact that millions of Americans fall under the definition of illiterate when it comes to financial literacy, not having or understanding how to prepare a budget can be detrimental to all your future plans; just as not saving can be catastrophic if unexpected emergencies pop up, which they always do. In numerous surveys, Americans show a lack of basic knowledge about critical financial issues like budgeting and savings. According to the experts at Bankrate.com, 82% of Americans say they keep a budget. Other surveys show that nearly one in three Americans prepare a detailed household budget, the majority do not. Baby boomers and GenX have the highest percentage of budget keepers that use paper and pencil. Gen Z and Generation Alpha are more likely, if they keep a budget, use websites and apps. You are more likely to budget if you make at least $75,000 per year.
A Gallup poll found only about ⅓ of Americans (32%) maintain a household budget and only 30% of Americans have long-term financial plans that include savings and investment goals.
How do most people keep a budget? One-third of Americans scrawl their budgets on paper; while another 20% keep it in their heads. The generation that came up in the technology ages is the ones most likely to use technology, which is a more accurate and reliable way to keep a budget. Keeping a budget in your head is not such a good idea according to (Bank Analyst, Cleas Bell”), “mental accounting is really unreliable and prone to mathematical mistakes and rationalizations.” Baby Boomers make up the large percentage of individuals that use mental accounting. Budgeting is one of the most effective money management tools out there, yet so many find it difficult to start or keep a budget.