Retirement and Financial

A Guide: 5 Steps to Financial Literacy

Where should one start when building financial literacy? Discover key strategies and tools to take control of your finances and secure a brighter financial future.
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Since the pandemic’s onset, 91% of employees say they have faced a personal financial issue.  

A personal financial issue could look like this: 

  • Struggling to maintain a household budget 
  • Reducing and paying off debt 
  • Building an emergency savings plan 
  • Keeping up with day-to-day bills 
  • Paying for an unexpected expense 

Many times, Americans struggling with personal financial issues have no education on how to manage their finances. In other words, financial literacy is low.  

Where should one start when building financial literacy?

5 Steps to Financial Literacy

Being financially literate can change one’s outlook toward money and ultimately guide one to make smarter financial decisions for years to come.  

There are five main steps to prioritize to becoming financially literate.

1) Learn How to Budget

Budgeting is the most crucial step when becoming financially literate because it helps set boundaries around spending. Basic expenses, including the cost of living (rent/mortgages, food, gas, child care, etc.), are all generally set each month or estimated by looking at previous months.  

This is a starting point when setting a budget so that basic expenses will be covered monthly and all other costs are supplementary.

2) Reduce Spending

Naturally, once a budget is set, reducing spending is a simple and efficient way to start implementing financial literacy practices.  

Reduced spending could look like: fewer meals out of the house, coffee out twice a week, walk more to the store to save on gas. Any activity that can also be done at home or can save on basic expenses is an easy place to start.  

It is also important to note that this can be started small. For example, setting a goal to eat out only twice per week for an entire month helps to build this new habit. Reduced spending does not have to be a significant change.

3) Open & Utilize a Savings Account

Once a budget is set, it is much easier to estimate the amount of money that should be set aside each month or paycheck to a savings account. In 2022, approximately 56% of Americans would be unable to cover an emergency expense of $1,000 or more.  

Building an emergency savings fund is crucial to becoming financially literate as it demonstrates the importance of a backup plan.

4) Understand Credit Scores

Credit scores, while simply a number, are vital to keeping up with finances.  

Credit scores help lenders determine how trustworthy a person is, which comes into play when one rents or buys a home, purchases a car, takes out a loan, and so forth.  

A lot goes into making one’s credit score and how it gets adjusted–increased or decreased. To learn more about credit scores, click here.

5) Understand & Expect Risk

Unexpected expenses are bound to happen, and they occur for everyone every year. In 2022, around 58% of Americans live paycheck to paycheck, with many unable to cover an emergency expense of $1.000 or more, as mentioned before.  

The pandemic was a major unexpected event that challenged many’s abilities to live A financially secure life. With a budget, reduced spending, consistent contributions to a savings account, and an understanding of how credit scores are affected and adjusted, the ability to expect and prepare for risks becomes more attainable; in other words, financial literacy is more achievable.

Tips to Improve Financial Literacy

Employers are in an interesting place when it comes to finances because there are now so many great employee financial wellness benefits 

Here are a few ways employers can help improve financial literacy among their employees 

  • Offer a no-cost Financial Wellness Platform as part of the employee benefits program.  
  • Share financial newsletters and articles via email. 
  • Share financial podcasts with employees. 
  • Keep the door open with employees to discuss finances (wages, salaries, benefits) 24/7 without judgment.

Best Financial Wellness Programs

With a mission to alleviate student loan debt, Summer partners with organizations to offer tailored solutions supported by proven technologies, policy expertise, and individualized support.
With a global network of Certified Financial Planners, cutting-edge technology, and personalized support, Origin enables employees to take control of their financial health and build a secure future, regardless of location.
By providing personalized support and guidance, Questis combines human expertise with cutting-edge technology to heal the root causes of employee financial stress.
Your Money Line_logo
Your Money Line's platform provides unlimited 1:1 human money coaching, world-class education, and AI-powered tools to proactively prevent financial issues within the workforce, ensuring economic stability for employees.
best money moves llc_logo
By leveraging machine learning technology, Best Money Moves delivers personalized content and tools to address various financial stressors, ultimately improving employee productivity and well-being.
With advanced reporting capabilities and white-glove customer support, LearnLux enables employers to drive adoption, engagement, and tangible results, including reduced financial stress and increased productivity.
Financial Knowledge is a trusted provider of financial education for workplaces across North America to empower employees to make informed decisions without any conflicts of interest.

On a Final Note 

Financial literacy is a process that is developed by building smarter financial habits. Habits are formed by making small, incremental changes which sometimes require tools to help make these changes.  

Education is a big piece of financial literacy, but if one is struggling with their finances now, education won’t help them to make these habit changes. They need tools, like a financial wellness platform, to help them get started.

Disclosure: Some of the products featured in this blog post may come from our partners who compensate us. This might influence the selection of products we feature and their placement and presentation on the page. However, it does not impact our evaluations; our opinions are our own. The information provided in this post is for general informational purposes only. 

Written by rebecca smith vp of marketing

Financial Wellness Programs

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