The Costly Money Mistake Almost Every Adult Makes
The majority of Americans are concerned about their financial well-being, yet many struggle with basic financial management skills. One of the most common mistakes people make is believing that carrying a small balance on their credit card will improve their credit score.
This is incorrect, and in fact, carrying a balance can lower a person’s credit score and result in high annual percentage rates that make credit cards an expensive way to borrow money. To address this and other financial myths, there is a growing need for financial education and a change in how people approach money.
Financial education should begin at home, with parents talking to their children about finances in an age-appropriate manner. Many lessons are learned through exposure, and these conversations are necessary for building good credit habits.
In addition, more states are requiring high school students to take personal finance courses before graduating, and there are pending personal finance education bills in several other states.
Studies show that personal finance courses have long-term benefits, with students who take them being more likely to tap lower-cost loans and grants for college, having better average credit scores, and being more likely to save and plan for retirement as adults.
However, managing money is complicated, and many people struggle with it even with proper education. To address this, Laurence Kotlikoff, an economics professor at Boston University and president of MaxiFi, suggests using available technology to help manage finances.
As a profession, financial experts need to move from studying mistakes to providing answers, like doctors prescribing medicine.
Overall, financial education and a change in mindset are necessary for Americans to improve their financial well-being. By learning basic financial management skills, people can avoid common mistakes and make informed decisions about their money.