Managing Finances

Source: AARP.org | March 15, 2007

Americans of all ages should have financial literacy tools to help manage their finances and save for the future and should have better, easy-to-understand information to help them manage their money wisely.

The sooner a person starts saving for a first home, their children's college education, and their own retirement, the more freedom they have over their own future. How many of us wish we knew at the start of our adult lives what we know now about saving money for the future? Educating our children about savings, credit cards and easy debt is crucial to their opportunities tomorrow.

Help needed to finance the future

Too many Americans are overwhelmed by consumer debt and are unprepared for the future. As retirement savings shift away from company-sponsored pensions to individual, savings, financial savvy is more important than ever. Everyone, especially those just entering the workforce, needs to learn basic financial skills to protect themselves and ensure their future. All Americans need to learn more about how to earn, spend, save, invest, and protect their own money.

A nation of debtors in need of information

There's a lot of temptation out there to spend. Coupled with escalating health-care costs and the steep cost of housing and other basic necessities, many Americans spend more than they earn. And, credit is available to more people, including students and borrowers with low credit-ratings.

• The average household consumer debt comes close to $9,000.
• The number of Americans filing for bankruptcy jumped 30 percent from 2004 to 2005 with filings in the federal courts totaling more than 2 million.
• The number one cause of divorce is financial pressure.

Poor credit management decisions may result in late payments and reduced savings, potentially ruining a person's credit history for years to come.

Unfortunately, many consumers don't know how the credit reporting system works. Companies collect, score and sell information about financial histories to creditors - and to employers, insurers, landlords, utilities, and others who use it to make vital decisions. This information can affect the ability to get a loan, insurance, or a job. People have the opportunity to improve their credit scores and the right to ensure that this information is accurate. However, many people may not know how to or the importance of improving their credit ratings or correcting errors.

Many need access to better financial services

In spite of the unprecedented wealth in the U.S., approximately 4.4 million households age 50 and older try to manage their money without a checking account. This often means they rely on more expensive alternative services, like check-cashing and money-wiring services, and lack a safe way of saving on a regular basis. This is sometimes due to cultural differences; people born outside of the U.S. may find it difficult to navigate or access traditional financial services. Lack of access to banking and mortgage lending also hurts many low-income and minority neighborhoods where residents are forced to rely on high-cost alternative financial services such as sub-prime mortgage lenders and mortgage companies that lend to borrowers who do not qualify for loans from mainstream lenders at prices that are higher than those quoted by mainstream lenders, also known as predatory lenders.

Consumers can learn to earn, spend and save wisely

Poor money management can leave families in financial ruin and at the mercy of predatory lenders with excessive interest rates. But with the right tools, consumers can make choices that improve - or at least do not damage - their economic well-being. With financial know-how, individuals and families can better manage their day-to-day money and set savings goals to buy a home, go to college and retire.

Financial literacy training can include advice on:

• Saving, even with a modest income.
• Selecting lenders and managing credit.
• Managing debt.
• Setting and reaching specific savings goals.
• Avoiding financial pitfalls and scams.

Families can have healthier financial futures, with a little help. Workers of all ages need financial literacy training

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