Investing in your future: the importance of financial awareness

By: Joseph Hammett 

Photo: Financial gain (38/365) by John Liu is licensed under CC BY 2.0

Students often receive encouragement from parents and teachers to focus on investing in their futures. However, these are the same students who have been taught very little about the importance of making wise investment decisions. Investing in one’s future does not simply involve going to school, taking the right classes, and getting a job right out of college.

Financial awareness and efficacy requires learning the basic principles on managing personal finances. Learning about filing taxes, understanding insurance, opening a checking account, maintaining a good credit score, and investing one’s money towards his or her future are all fantastic ways to understand personal finance.

Yasmine Zerhouni, a nineteen-year-old business major, stated, “Personal finance is being aware of your budget and knowing how you spend.”

Wall Street, New York by dflorian
1980 is licensed under CC BY 2.0

For young people, the money they spend is directly connected to their income. A study from the National Center for Education Statistics revealed that almost half of all college students are currently employed while enrolled. While it is important to have a job in order to work towards financial freedom, having more financial revenue does not necessarily equate to financial stability.

As proclaimed by the deceased rap artist, The Notorious B. I. G., “It’s like the more money we come across // the more problems we see.”1 Young people probably have the most trouble balancing their budget, considering many of them have been dependent on their parents for much of their lives.

According to a study from the Allstate foundation, only a quarter of teenagers think they will be ready to financially support themselves by the age of 27. So where can young people go from here? It’s time to learn how to save money, and how to set aside money for the future. Impulse purchasing, Netflix subscriptions, and other unnecessary spending habits need to be eliminated in order to invest in more rewarding prospects.

The 2015 Millennial Money Report showed that 14 percent of people in their twenties are not saving any money at all. This will create a rude awakening for many of these people when they are forced to support themselves.

One way many students are forced to confront their financial awareness is in the financing of student loans. A study from H&R Block revealed that student debt has nationally grown to over one trillion dollars. This is greater than national credit card debt.

More than half of Marymount’s 2015 graduating class borrowed money towards their tuition, owing an accumulated average of $30,054. It is important to seek financial counseling to understand when one is getting in over their head. The Financial Aid Office at Marymount has a wide range of resources, including workshops and brochures. In 2015, around $68 million went out as financial aid at Marymount.

Students do not necessarily know about or take advantage of their opportunities while building their financial awareness. 48 year old Rosa, a registered dental hygienist in Maryland who did not wish to give her last name, believes that young people have a false perception of personal finance.

“Young people should interview different banks before opening a checking account,” she said. “There are hidden fees that one needs to be made aware of. You should always save, though. Kids lack the ability to sacrifice. They use money for vacations and entertainment, treating a credit card like monopoly money. They want things now and will put themselves in debt to get it. There are terrible interest rates to pay off this debt. The false sense of security involved with credit cards can cause a lot of problems.”

Situations, such as the ones Rosa was describing, highlight the necessity for financial awareness.

Zerhouni, on the other hand, has actually learned how to manage her spending habits from young people around her.

“I don’t think our generation suffers from financial ignorance,” she argued. “I have become more careful about what I spend from seeing how my peers manage their budget.”

Everyone’s financial experiences and perspectives are a little different due to varying backgrounds and lifestyles, despite the fact that currency unites us.

The National Financial Literacy Test shows an average score of 62.42 percent for those who participated. That is a failing grade, America. To motivate young people to learn more about finance, one must first understand why the knowledge of personal finance so important. First of all, without an adept understanding, a person is prone to making mistakes. In a country where 4.5 percent of Americans live in poverty, no one can afford to make these kinds of mistakes.

Financial efficacy empowers a person, making them stronger and wiser.

Zerhouni stated, “When you work for a living, you are more independent. Financial awareness is the first step towards comprehensive independence.”

Twenty-year-old finance major, Danny, who wished to have his last name withheld for this story, said, “If one doesn’t understand the basic principles of finance and saving at a young age, they are unprepared for the responsibilities of adulthood. Financial ignorance blinds and prevents people from gaining independence and a quality life. No one our age takes finance seriously enough. They undermine its importance. Everyone expects a 6-figure job right out of college but that almost never happens. The moment you reach the age of eighteen, your signature is worth something. Signing a loan you don’t understand can affect every major event for the rest of your life. Starting off on the wrong track can hurt your credit and prevent you from affording a home, having kids, and even retiring. Everyone should take at least one finance class to understand what they are getting themselves into.”

Taking classes on the fundamentals of finance is just one way to understand financial efficacy.

Rosa offered, “There are ways to do the things you want without spending a lot of money. Make a monthly budget including gas, rent expenses, car payments if you have one, and food. If you’re not making a lot of money you may have to take it week by week. Whatever you’re making, if you have money leftover it should go to savings.”

Zerhouni recommended only carrying cash as a way to make one more aware of their expenses. Cash brings control to spending habits because, once you run out of cash, you are forced to think through your expenses when you decide to take out more money.

Personal financial management by Danjo
Paluska is licensed under CC BY 2.0

“I used to not always be careful with spending money,” she said. “I have learned that, even if eating out is my only expense, I can still prepare food at home to lessen my expenses. I keep the bank statements from my account and highlight the things that I can actually remember buying. Just by reading what you have spent money on in the past month, you begin to recognize the expenses that were necessary versus the ones that were unnecessary.”

Investing in the future is a huge part of putting financial awareness into practice. The more preparation goes in now, the more payoffs there will be down the line.

“If you start saving now, while there is little, once you have your full time job you will already be used to it,” Zerhouni said.

She recommended that attending workshops on personal finance at Marymount or finding a financial counselor would be helpful to those who want to learn more about finance. Danny recommends literally investing money, towards a better future.

“Anyone can manage their own portfolio if they give a tiny bit of time to it,” he said. “A lot of mutual funds take advantage of people with ridiculous fees. 5 percent is crazy.”

Financial efficacy is clearly important for every young person. Many do not recognize the power they possess with the money they hold. The more knowledge one possesses in the field of finance, the farther they will be able to get with their personal finances.

Personal finance is the ability to recognize one’s financial stature and how to work with that. Adept personal finance skills require a financial awareness, which is the knowledge one possesses regarding their monetary avenues.

Financial awareness, and understanding how to manage your money, empowers individuals and makes them more independent. Investing in your future is very important because no one knows what tomorrow may bring. Get educated on your personal finance and start investing in your future.

1. 1. The Notorious B.I.G. (1997). Mo’ Money Mo’ Problems [Recorded by The Notorious B.I.G.]. On Life After Death

             [MP3 file]. Basin Trinidad, WI: Caribbean Sound & New York, NY: Daddy’s House Recording Studios.