Financial literacy is the backbone of a solid financial life. It is so surprising that so many people in the United States have little understanding of their financial lives, which means, they have no control. Understanding how your finances work, especially how credit works is the key to financial wellbeing. In the last two blogs of this series, we looked at how financial illiteracy can cost you a fortune, and we’ve been looking at the story of the popular RnB singer R. Kelly. In this blog. In this blog we continue from where we left, this time, we focus on the ‘saving’ aspect of establishing a sound financial life.
Savings is another area of serious concern for many Americans. Surveys have shown that fewer than 40% of Americans have money saved for a $500 or $1000 emergency medical bill or a car repair. The average U.S. savings account contains around $16,420.00 and the median U.S. savings account contains around $4, 830.00. Experts say that by 30, you should have saved half of your annual salary.
For example, if you earn 50,000 you should have 25,000 in your savings for retirement. By the time you are 40 years old, you should be having twice your annual salary saved. By the time you are 50, you should have four times your annual salary and by 60 it should be sixty times and by the age of 67, you should have eight times your annual salary put away for savings.
A 2018 Government Accountability Office study found that nearly one-third of Americans age 55 and older do not have any retirement nest egg. Millennials, those in their 20s had average retirement savings of $31,000.00. Economic Policy Insitute estimates that ages 32 to 37 had saved $31,644.00; ages 38 to 43; $67,720.00; ages 44 to 48 average saving was $81,349.00. Finally, those aged 50 to 55 had saved an average of $124,831.00. And even those amounts are well below what most conservatives feel is an ideal saving plan. The Baby Boomer generation has a tried-and-true old school, 80% rule. Save as much as you would need to get paid 80% of your salary for about 20 years.
Not being able to read or to write must be one of the worst feelings imaginable, with words printed everywhere and other adults and children reading all around you. I can just imagine the feelings of loss and disconnection they must endure. Yet, when a person is financially illiterate his situation is not far from the person that can’t read or write. With both, it’s just like walking around blind with a guide. This lack of knowledge hurts the individual as well as the society as a whole. It’s never too early to start learning or teaching your children about finances. The earlier the better and hopefully here in America, we can put an end to financial illiteracy.