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The #ScaryStats of Financial Literacy

Halloween, horror movies, zombies... all pretty scary stuff!

But the real terrifying epidemic we have on our hands is the number of American citizens who are financially illiterate.
What is financial literacy? From the name itself it sounds boring and irrelevant, where we assume we're all financially educated because we understand how to count the dollars in our account. The National Financial Educators Council states that the literal definition is understanding the topic of money. So, from that we must be correct in our original assessment.
However, they also go on to say that this definition doesn't tell the whole story! It's only one area of financial wellness and it takes more than "understanding the topic of money" for financial literacy to make a meaningful impact and difference in people's lives. Don't you want to be more confident about your finances and your financial future? Feel equipped to make better decisions? Have peace of mind day-to-day and raise your quality of life? While it alone does not guarantee financial security, financial literacy focuses on your behaviors, systems, sentiment, and regular evaluation to confidently make any adjustments to best fulfill your goals.

So there's hope! 

It is possible to start securing your financial future or turn your situation around. Part of Neighborhood Credit Union's mission is to be a resource and provide the tools for financial education to our members and the community. We're going to look at four #ScaryStats this October surrounding financial literacy and provide some easy and doable action items to combat this scary epidemic!

Woman screaming and a surprised look on her faceScary Stat #1: 50% of adults don’t have enough savings to cover 3 months of living expenses.

The amount you need to have saved looks different for everyone, but the horror around this statistic should be the same. 
We're not just talking about an "emergency fund" for an unforeseen medical expense, but what if you were unable to work for a few months because of that medical emergency? Or surprisingly laid off from your job? You may be contributing to your 401(k) or depositing regularly into your high yield savings account, but unfortunately it is not enough to reach or maintain financial stability.

Why We're Not Saving

Aside from not having good discipline, there's multiple reasons that many of us have been unable to save. Bankrate mentions that household expenses have gone up but incomes aren't rising fast enough to keep up with the pace. Another reason may also be that there's been a rise in freelance or consulting services, where demand (and therefore, your income) can change from week to week. Those that experience income instability generally feel powerless to save because of constant unpredictability or unplanned expenses.

What to Do Next: Make a Plan

  1.  Determine how long you'll save for. Most experts believe that you should have at least 3 months worth of living expenses saved, but 6 months is better. In some cases it is advised that a 6 month cushion would not be enough, like those listed below:
    • If you are the breadwinner
    • You are freelance or an entrepreneur, or have a variable or unpredictable income
    • Before or during a recession, or when unemployment rates are higher
    • You are in a high-risk industry where layoffs are common
    • You're retired and most of your money is in volatile stock and bond investments
  2.  Look at what you spend. You'll need to determine the amount to keep in this fund by estimating your costs for critical expenses, such as:
    • Housing
    • Food
    • Heath care, including insurance
    • Utilities
    • Transportation
    • Personal expenses
    • Debt payments
  3. Start saving now, even if it's just a little bit at time. Something is always better than nothing! It's not too late but don't let an unforeseen emergency or a possible recession sneak up on you. Try automating your savings so that you don't even notice it's "gone." It all eventually adds up - so much so that a year from now you'd wish you had started today. 

Try Our Emergency Savings Calculator

Here you can easily calculate how much is recommended to maintain in your emergency savings account in order to cover 3, 6, or 12 months of unemployment or loss of income - and how long it will take for you to get there. Try our Emergency Savings Calculator here.

Help Us Spread the Word!

It's not just plain ol' financial literacy we're talking about - it's financial freedom, stability, and power. We want to change the stigma around financial literacy by dropping the veil surrounding finance and providing actionable insights that really could make a difference in your life. Share on social media or send to a friend!
Don't forget to check back next Thursday for our next #ScaryStat!

We're Here For You

You don't have to figure all of this out by yourself. We have resources and calculators focusing on money basics, loans and buying a home, retirement, and even how to pay for college. Start utilizing our free Financial Education Center today!