|by Russ Wiles, The Arizona Republic|
Those aren't the responses she's looking for.
"What makes people financially successful," Vallee said, "are discipline and the ability to delay gratification."
It's an insightful moment for the mostly moderate-income women in her session on basic budgeting. But it also could be considered an instructive lesson for a spend-happy society as a whole.
Five years into an economic recovery, many Americans aren't feeling good about their progress, with the gap apparently widening between rich and poor. Jobs explain part of the discrepancy — people with college degrees have a much lower unemployment rate, for example — but so might differences in financial literacy or understanding.
Money doesn't come with instructions, and there's no doubt that the world has become more complex financially. But there is also plenty of evidence that Americans haven't learned the basics. Some people rack up big credit-card balances or spend too much on assets that depreciate, namely cars and trucks.
Others pay too much in banking fees, leave themselves vulnerable to fraud, fail to participate in retirement accounts and invest too cautiously, parking money in low-yielding deposit accounts while avoiding the stock market entirely.
Consequences of low financial literacy include paying too much in fees or interest, leaving matching funds on the table in retirement plans, not using available tax breaks, retiring with inadequate assets and failing to meet basic goals such as homeownership.
If there's one worrisome symptom, it's the widespread inability of many individuals to build up an emergency or rainy-day fund. Sometimes, that's the result of a failure to delay instant gratification. Financial advisers once recommended socking away enough cash to meet three months' worth of expenses in a pinch. But many now suggest six months' or even a year's worth because of the longer time it now takes to find employment.
A meaningful savings account "means you have the resources to absorb the shocks of life," said Vallee, a retired
No wonder the tough economy of the past half-dozen years has been so challenging.
Conversely, a study last year of millionaires by Capgemini and
Nearly 46 percent of
So, enter the importance of something as basic of budgeting — tracking expenses and income every month. It's an exercise that Americans routinely ignore.
"I have a booklet at home where I write down all my bills," she said. "It lets me know almost exactly how much I can spend or how much over I will be."
Estrada also wants to learn more about credit-card terms and usage, and one day she would like to be a homeowner.
Americans express frustration about their lack of money acumen. In a poll conducted by the
Young adults are less confident and seniors the most confident, according to a separate poll by
Partly, frustration reflects the fact that the world has become more complex financially. Decades ago, savers plunked their money into plain-vanilla passbook savings accounts, and they bought homes with one type of loan — a 30-year fixed-rate mortgage. Many workers had pensions that took care of their retirement-planning needs. Nobody felt the need to manage debit cards, online accounts, 401(k) plans or credit scores; they didn't exist. Few people worried about identity theft. Insurance and income taxes were simpler.
The world has changed, but money-oriented education hasn't kept pace. In the
"It's not rocket science, but it's hard," said Vallee, referring to budgeting, saving, dealing with debt and other topics taught in the
Most Americans don't receive formal personal-finance instruction at an early age, if at all, even though it's a topic they will apply in varying degrees throughout their lives.
"Budgeting would help me, but they don't talk about this at my high school," said
There has been some progress, with
"They come here to apply the lessons they've been learning in class," said
"We teach about interest, taxes and other concepts," Slaughter said. "A lot of light bulbs go on."
"Kids will say, 'Now I see why my dad works two jobs,'" Himmelberg said. "You see those moments."
Money basics: How much do you know?
Try your hand at the following 10 financial-literacy questions. The first five are from a quiz developed by the
1. Suppose you have
A) More than
C) Less than
2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After a year, would the money in the account buy more than today, the same or less?
3. When interest rates rise, what typically happens to bond prices?
A) They rise.
B) They fall.
C) They stay the same.
4. A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.
True or false?
5. Buying a single company's stock usually provides a safer return than a stock mutual fund.
True or false?
6. Take-home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out?
B) Income tax, property tax, and
C) Income tax,
D) Income tax, sales tax and
7. A couple receive money as baby gifts and want to put it away for their child's college education. Which of the following tends to have the highest growth over periods of 18 years or longer?
A) Checking accounts.
C) Government savings bonds.
D) Bank savings accounts.
8. If you are behind on your debt payments and go to a responsible credit-counseling service, what help can they give you?
A) They can cancel and cut up all your credit cards without your permission.
B) They can get the federal government to apply your income taxes to pay off your debts.
C) They can work with those who loaned you money to set up a payment schedule you can meet.
D) They can force those who loaned you money to forgive all your debts.
9. If your credit card is stolen and the thief runs up a debt of
10. If you cause an accident, which type of automobile insurance would cover damage to your own car?
1. A. Compounding, or earning interest on interest, would result in more than
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