Becoming financially literate means gaining an understanding about how money is made, saved, and spent. It involves gaining the ability to use your own financial resources to make the best decisions for your situation, whether that means earning more money, or saving, investing, and spending your money wisely.
Gaining and increasing financial literacy is important because it helps you to get the most out of the money you earn, facilitating the process of saving for a home, for children’s college education, and for retirement, thereby maximizing funds for what’s most important to you.
In short, knowledge is power.
Higher levels of financial literacy have been linked —and consistently so—to responsible financial behavior. This helps consumers to:
• avoid high-cost debt
• plan for financial goals
• avoid defaulting on mortgages
• build an emergency savings fund
• earn higher interest on investments
Unfortunately, studies indicate that Millennials are less financially literate than other generations. In fact, only 24% of people from this generation could demonstrate basic financial knowledge, with just one-third of that group (8%) demonstrating high financial literacy.
Financial education is key, but Millennials can be overconfident in their knowledge, which can prevent them from researching and learning more. More specifically, by looking just at college-educated Millennials, approximately 70% of them rated themselves as having high financial literacy; in reality, only 34% even had basic financial literacy.
Yet, only 27% of Millennials seek advice from a financial professional about savings and investing despite the fact that 34% of survey participants were dissatisfied with their financial situations (and 18% not being satisfied at all with theirs).
The study focuses on Millennials, at least in part, because this generation will be shaping national and global economies, which makes their gap in financial literacy-related knowledge a concern.
The financial literacy assessment questions focus on key components of this type of knowledge, which includes:
• understanding how to create an effective budget, so that you’re aware of and accountable for where your money is going
• understanding how interest works when you save and invest, as well as how it works when you borrow, including the concept of compound interest
• saving, whether that means for emergencies or for a specific goal, such as a big-ticket item or even a house
• managing your debt and avoiding the credit card debt rollercoaster
• protecting your identity and otherwise using practices to safeguard your funds
• investing wisely, according to what kind of investor you are
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Educating Yourself
If you’ve taken our quiz, the financial literacy questions will likely have helped you to pinpoint where you need to bolster up your own understanding of money matters.
Financial topics can be challenging but, fortunately, there are plenty of resources to help you increase your knowledge, including at SoFi Learn.
There is in fact an entire section of SoFi Learn that’s dedicated to helping people gain financial literacy by defining terms related to student loans, home ownership, credit, and investing, and answering frequently asked questions in those areas.
SoFi Learn also provides insights into life and career issues, including how to budget, how to get a raise, and much more. There are also numerous tools and calculators available there to help you do some number crunching and give you a better picture of your finances.
There are also government resources, including those available at the Financial Literacy and Education Commission (FLEC), connected to the Treasury Department. This commission was founded to boost literacy.
If you have questions about federal agencies connected to financial literacy and education, or their programs, benefits, or services, you can call 1-800-FED-INFO. The specialists who answer the phone can answer questions in English or Spanish, or they can refer you to the appropriate agency.
Another government site, one created by FLEC, is dedicated to financial education: MyMoney.gov .
This site provides practical information about each of what they call the five building blocks for money management (MyMoney Five), which are:
• Earn: Understand your pay and benefits to make the most out of what you earn.
• Save and Invest: Start as soon as you can to save for future goals, even if you need to begin by saving small amounts.
• Protect: Create an emergency savings fund, choose the right insurance for your needs, and otherwise take precautions to protect your finances.
• Spend: Shop around and compare prices and products to get a good value on purchases, especially with larger ones.
• Borrow: Borrowing allows you to make essential purchases and also helps you to build credit, so it makes sense to understand how to borrow in the smartest way possible for your situation.
Another government resource is Federal Reserve Education , which provides resources for educators and students alike, while also empowering consumers to boost their understanding of banking, including central banking and monetary policy; economics/macroeconomics; our government’s role in money regulation; personal finances; and more.
You can filter resources by your age, and by type of resource, which includes activities, blog posts, comic books, infographics, online tools, video, and much more.
Here’s another financial literacy resource from the federal government: FDIC’s Money Smart . This program provides resources to help people learn how to improve their financial management skills.
These include computer-based instruction games with separate learning tracks for adults and young adults (aged 13 and up). Each time you complete a module, you can earn a certificate of completion. Money Smart also provides podcasts that focus on saving and borrowing, as well as helpful videos.
Colleges, adult education centers, libraries, and community centers often offer financial management classes, and there are also online courses to consider. It can also make good sense to consult with a financial planner, who can walk you through your own unique challenges and opportunities.
If you’d like to help children learn about financial literacy in an age-appropriate way, Jump$tart’s Reality Check Reality Check allows them to answer questions online to help them understand how much money will be needed for them to live their dream lifestyle.
Whichever sources you use to educate yourself, make sure they’re reputable. Like with any topic, there are great resources—and then there are some that aren’t so hot.
Another Way to Gain Financial Literacy
Another way to help with your financial literacy is to use an account where you have insight into your spending and saving. SoFi Checking and Savings® is a checking and savings account where you can spend, save, and earn all in one place.
You can keep an eye on your spending with the weekly spend dashboard within the SoFi app. On top of that, SoFi Checking and Savings gives you the ability to create different vaults within your account to save for different spending goals, like a travel fund or an emergency fund.
It’s fast and easy to sign up for SoFi Checking and Savings. In fact, you can sign up in just 60 seconds. You can manage your mobile transfers and photo check deposits by your mobile device, and send money to anyone you need, right from your app. And, when you send funds to other SoFi Checking and Savings holders, they’ll receive them instantly.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
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