April is Financial Literacy Month, and this year it could not come at a more difficult time. The spread of the coronavirus has led parts of the country into a lockdown, skidded economic activity to a near halt, and overwhelmed hospitals with an ever-growing inflow of patients. Although it may feel like a perfect storm, we also need to remember that it is during a storm that sailing lessons prove their worth. And by sailing lessons, I mean the skills that come from financial literacy.
It has been 16 years since April was declared Financial Literacy Month. Its advocates hoped it would spark federal, state, and local governments, as well as schools, nonprofit organizations, businesses, and individuals, to celebrate the month with financial literacy programs and activities. Over time, Financial Literacy Month has also played an integral role in the national strategy for financial literacy, not only in the United States but in other countries as well.
By dedicating a month to financial literacy, policymakers acknowledged its importance well before subsequent financial crises unveiled, in painful ways, the price that individuals, families, communities, and our country pay when financial knowledge is lacking.
Doctors know prevention is better, and cheaper, than a cure. That's why May is Mental Health Awareness Month, October is Breast Cancer Awareness Month, November is National Diabetes Month, and so on. This April it is clear that we are overdue in stepping up our prevention efforts when it comes to financial behaviors. Although the frontline of the pandemic is health, the coronavirus is also affecting our finances in far-reaching ways. That makes Financial Literacy Month especially salient. As we continue to raise awareness, it is time to push three actions that can help all of us gain more financial resilience.
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No. 1: The federal, state, and local governments have taken steps to help us through this pandemic. Let's make sure everyone knows about and understands these measures. We must make it easy to access the new benefits, and the information related to them must be simple to understand, with examples on how they can be used. It is essential that people are able to make the most of these new resources and opportunities.
No. 2: At some time or another, everyone confronts a financial emergency. The decisions we take can have lasting impact on us, now and far into the future. That is why we must embed basic financial literacy into our education system. Currently, according to the latest CEE's Survey of the States, only 21 states require high school students to take a course in personal finance. During this time of physical distancing when we are at home, perhaps homeschooling our children, we have an opportunity to advocate on behalf of financial literacy.
Let's each of us make sure that financial literacy becomes part of the curriculum in our own school district, just as reading literacy is, starting in the new academic year. Everyone — including parents, teachers, students, and the business community — can advocate for it. This link provides all the resources needed to start a high school financial literacy program.
No. 3: As the current crisis has made clear and as every personal finance course emphasizes, retirement savings in tax-advantaged retirement accounts are important but not enough. Yes, it is critical that we think about the future, but every household also needs emergency savings to help navigate turbulent times. We must identify ways to make these savings strategies simple, even automatic. For example, just as employers automatically enroll employees in retirement accounts, they could also launch initiatives aimed at promoting employees' emergency accounts. To achieve this, employees will need to be informed and educated. Financial Literacy Month is an ideal time to share best practices and spotlight programs that successfully encourage emergency savings and benefit both employees and employers.
For the entire month of April this year, let's make sure that we all work together to put us on an even keel. More than ever, we need basic skills and good directions as we sail through troubled waters.
—By Annamaria Lusardi is the Denit Trust Endowed Chair of Economics and Accountancy at the George Washington University School of Business. She is also a member of CNBC's Financial Wellness Advisory Council.
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