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Jean Chatzky: Join the fight against financial illiteracy, create successful, stable families

Jean Chatzky

Jean Chatzky wrote this article to mark Financial Literacy Month and in support of the New York City financial literacy program, Literacy Partners.

Did you know that more than 70 million Americans are “underbanked”? That means they lack all or sufficient access to mainstream financial institutions and use cash, money orders and a mix of check cashing, payday loans and other costly, nontraditional arrangements to manage their finances on a day-to-day basis.

What’s more, a recent iVillage study shows that 61 percent of moms are primarily responsible for their household finances. Nearly half of those moms wish they were more informed about managing money and being financially responsible so they can pass this knowledge along to their children.

Even the Girl Scouts recognize the need for information on this issue, and are now offering financial literacy merit badges — 13 in all — for everything from budgeting to good credit to philanthropy.

As a mother, author and personal finance expert, it’s been clear to me for a long time that there is a growing need for basic financial literacy instruction for parents and children, especially those in lower income brackets. But it’s even more necessary in this troubled economy. Being educated on fundamental personal finance issues — from how to open a bank account to how to establish a household budget — can make a major impact on both the financial future and overall stability of the entire family.

As a longtime supporter of Literacy Partners, New York City’s only nationally accredited adult literacy program, I’ve seen firsthand the impact of their financial literacy program on individuals, parents and families. One of the first lessons taught as part of their Economics for Life program is about the differences between needs and wants, perhaps one of the most essential things to understand when managing personal and household finances. Often this conversation sparks a real “Ah-ha” moment for students, marking the first time they’ve thought about this difference. By the end of the program, on average, over 80 percent of students have created and are using a household budget and 68 percent have opened a bank account. I have seen similar situations with some of the families I have coached. The impact of adopting one simple habit — tracking where your money is going — is huge. Once families see how much of their disposable income is flowing unconsciously, they can take back control and make smarter choices.

So how can we as individuals make an impact on financial illiteracy? I recommend starting at home. I encourage you to review my basic Money Philosophy and talk to your kids about managing money — where money comes from, how they can earn it and what they can do with it once it’s in their pocket. Helping the community is the next step, by donating your time or financial support to established organizations like Literacy Partners. Finally, support funding for financial education, in K-12 schools and through adult education initiatives, by letting your local representatives know this is an important and growing issue, in your community.

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  • Nice blog, Jean. Great work with SavvyMoney, making financial literacy actionable.

  • Financial literacy programs are most successful when the whole family participates in the learning process. Thank you for addressing this topic in your blog, Jean!

  • Financial literacy education is indeed important and mothers out there to avoid committing basic financial mistakes that will make their life miserable. Children should be taught of this as well to prepare them when they become adults. I commend you for trying your best to spread this need and hopefully many people can get fundamental instructions so they can manage their personal finances well. Cheers!

  • Hi Jean – totally agree. Basic financial literacy, especially in lower income brackets, is fundamental.
    We have recently launched tools to compliment education and our first partners are the not for profit credit counseling agencies – where the need is greatest.
    I agree with Arjan, it has to be made actionable