These days, most Americans are stressed about money. And yet, when it comes to budgeting, saving and managing debt, many get some simple fundamentals wrong.
For example, according to one LendingTree survey, 65% of Americans think carrying a small balance on their credit card each month will improve their credit score.
That's incorrect.
Not only can carrying a balance lower your credit score, but sky-high annual percentage rates also make credit cards one of the most expensive ways to borrow money.
When it comes to finances, the answers are rarely this "black and white," said Kia McCallister-Young, director of the nonprofit America Saves, an initiative of the Consumer Federation of America.
More often, Americans are unsure, especially when pervasive money myths get in the way of good credit habits.
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"In order to find a solution, there needs to be more financial education and there also has to be a change in how we approach money," McCallister-Young said.
Too frequently, talking about finances is considered taboo, she added. While there is an important role for schools to play, a financial education should begin at home.
"Start talking to your children about finances in an age-appropriate manner," she advised. Many lessons are learned simply through exposure. "Those conversations are necessary."
Personal finance in schools gains momentum
Meanwhile, the trend toward in-school personal finance classes is gaining steam.
In the last year, seven more states required high school students to take a personal finance course before graduating, bringing the total to 18, according to the latest data from Next Gen Personal Finance, a nonprofit focused on providing financial education to middle and high school students.
In addition, there are 88 personal finance education bills pending in 28 states, according to Next Gen's bill tracker.
"There is so much content that needs to be covered," said Tim Ranzetta, co-founder and CEO of Next Gen.
"You only need to look at how teens get information today, mostly from TikTok, and if they don't have a foundation, then they don't have a way to discern what information is good and what is not."
Factor in new and evolving credit products like buy now, pay later, rising interest rates and a recent crisis in the banking sector among other issues — "we better help students keep up," Ranzetta said.
A 'wealth of evidence' shows long-term benefits
Many studies show there is a strong connection between financial literacy and financial well-being.
Students who are required to take personal finance courses starting from a young age are more likely to tap lower-cost loans and grants when it comes to paying for college and less likely to rely on private loans or high-interest credit cards, according to a study by Christiana Stoddard and Carly Urban for the National Endowment for Financial Education. (Students are also even more likely to enroll in college when they are aware of the financial resources available to help them pay for it.)
"Our results show that high school financial education graduation requirements can significantly impact key student financial behaviors," the authors said in the report.
Further, students with a financial literacy course under their belt have better average credit scores and lower debt delinquency rates as young adults, according to data from the Financial Industry Regulatory Authority's Investor Education Foundation, which seeks to promote financial education.
In addition, a report by the Brookings Institution found that teenage financial literacy is positively correlated with asset accumulation and net worth by age 25.
Among adults, those with greater financial literacy find it easier to make ends meet in a typical month, are more likely to make loan payments in full and on time, and less likely to be constrained by debt or be considered financially fragile.
They are also more likely to save and plan for retirement, according to data from the TIAA Institute-GFLEC Personal Finance Index based on research over several years.
"The wealth of evidence just continues to grow," Ranzetta said.
'The problem is, it's complicated'
To be sure, the hardest part of adulting continues to be managing money.
"The problem is, it's complicated," said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which works to analyze your spending, saving and insurance to make sure they match your lifestyle and level of wealth.
Say, for example, you are saving for a down payment on a new home and you want to build a budget that also takes inflation and taxes into account, he explained: "Nobody can do this in their head."
Some online tools can help, Kotlikoff advised. "Use the technology that's available."
"We have to move, as a profession, from studying mistakes to providing answers, just like doctors prescribe medicine."
