Expert Interview with Vince Shorb on Improving Your Financial Literacy for NewRetirement.com

Improving your financial literacy

Vince Shorb’s answer to the question “How literate are Americans when it comes to their money?” is sobering.

“Most Americans are financially illiterate,” the CEO of the National Financial Educators Council says. “They never received a financial education and lack the knowledge necessary to make financial decisions that are in alignment with their goals.”

Money management skills should begin in childhood. But personal finance is not taught in schools, and most parents aren’t qualified to teach their kids about money, Vince says. The result is high school graduates who have spent the past 12 years learning the skills to command a salary but who have spent little, if any, time learning how to save and grow that money.

Between 2012 and 2013, the NFEC conducted a nationwide test to measure the financial literacy of U.S. youth aged 15 to 18. The numbers are telling:

  • The average score was 59.6 percent
  • 4.7 percent scored at or above 90 percent
  • 11 percent scored at or above 80 percent
  • 21.9 percent scored at or above 70 percent
  • 62.4 percent scored at or below 69.9 percent

Here, Vince shares why everyone – whether they’re parents or retirees – should care about these numbers and what we can do to change them:

Can you tell us a bit about the National Financial Educators Council…when and why was the group founded? What services do you offer?

The NFEC is a full-service education company that provides financial literacy material, promotes advocacy campaigns, sets industry standards and shares best practices. As a financial literacy resource provider, the NFEC has developed more than 80 financial literacy assets designed to offer practical education, raise awareness and help ensure maximum program impact well into the future.

The Council’s mission is to create a world where people are informed to make qualified financial decisions that improve their lives, the lives of their loved ones and the lives of people they touch around the globe.

What advice do you have on learning about these topics in a way that’s approachable and not intimidating?

Fortunately, the financial lessons people need to learn in order to make educated financial decisions are easier than most high school level classes. And today’s technological age offers many engaging and varied learning methods – reading books or magazines, interactive online programs, watching YouTube videos or talking with mentors, for example. My advice is to find material and professionals that resonate with you, and develop a habit of learning at every opportunity.

What are money-management basics everyone should make sure to understand?

The NFEC’s Financial Literacy Framework and Standards identify 10 main areas of money management in which people should demonstrate competency. These areas include:

  • Financial Psychology
  • Budgeting
  • Account Management
  • Credit Profile
  • Jobs and Careers
  • Risk Management and Insurance
  • Economic and Government Influences
  • Loans and Debt
  • Entrepreneurship
  • Investing

Has our willingness to learn about personal finance and money management changed with the recent recession? How?

Most people felt the impact of the recent recession, but individual attitudes toward personal finance matters vary. For some people, the problems created by the recession detracted from the importance of gaining financial knowledge and taking an active role in managing their finances. Others were turned off completely from thinking about their finances. They experience trauma and displeasure when even thinking about topics related to money management.

What are the smartest things we can be doing to prepare for retirement?

Develop a clear financial plan and actively work toward accomplishing that objective. Many people spend well over 40 hours a week working to earn more money, yet they spend little or no time learning how to manage the money they’ve worked so hard to earn. Take time to build a team of trusted advisors, educate yourself around personal finance topics and take the necessary steps to accomplish your personal financial goals.

What are your favorite tools, resources, websites, programs, etc., for people who are navigating retirement savings and investing?

We suggest people find mentors, tools and resources that resonate with them. Then we recommend that people dedicate some time each week to educate themselves and take action that will move them closer to accomplishing their personal financial goals.

I personally like tools that streamline the management of my accounts – bill payment service and automating the transfer of money to savings and investment accounts. Mint.com is a great resource to keep track of ones personal finances, and I use Quicken to manage my business finances.

What headlines or news items do you think we should all be paying attention to in regards to our money? How will these events/developments affect us?

Higher Taxes: When we take into account Social Security, Medicare and future federal employees’ retirement benefits, the national debt is well above $50 trillion; some economists estimate closer to $100 trillion. How will this debt be funded?

Inflation: The Federal Reserve has printed more than $2 trillion since the economic crisis began in 2008. Economics 101 teaches us that when money supply increases faster than real economic output, inflationary pressure increases.

Looming Financial Crisis: There was a lot of talk about financial reform after the last financial crisis, but we’ve seen little action toward such reforms. The student loan debt problem is approaching the size of the subprime mortgage market prior to its collapse, “too big to fail” financial institutions are still far too big to fail, and the derivative market has potential to cause another global economic crisis.

It’s important for people to consistently invest in their financial education. In today’s age, they need to understand the current economic landscape and prepare for possible events that may affect their families’ financial security.

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