Financial Literacy Month 2020 - Message from the CEO
/Dear D.R.E.A.M.ers,
The D.R.E.A.M. Team would like to extend our thoughts and prayers to everyone across the globe dealing with the effects of the recent Covid19 pandemic. We would also like to pay special recognition to the essential workers, healthcare professionals, and public transportation personnel risking their lives, daily, on behalf of the rest of us; Your efforts and dedication are appreciated during this time. We encourage everyone to stay safe and continue practicing social distancing until we can all be together again, safely.
If you have been following our blog for some time, then you know that April is my favorite month of the year – it is National Financial Literacy Month! For us at D.R.E.A.M., financial literacy is celebrated every month, but April is a time where we can collectively seek to expand our financial literacy.
With all of the economic disruption occurring due to the current pandemic, coincidentally, financial literacy has never been more important. If you have the luxury to work from home, are sheltering in place, or recently lost your job, right now is the best time to enhance your financial literacy.
It appears that despite the increased awareness to financial literacy since the Great Recession of 2008/09, not much has changed in the financial literacy of Americans. According to the 2020 TIAA Institute-GFLEC Personal Finance Index, a test administered to U.S. adults ages 18 and older, revealed that only 20% of those tested were able to answer 75% of the questions correctly (a passing score). These findings are troublesome given that most Americans have the responsibility of critical financial decisions, such as managing a household or funding their retirement,, but seemingly are lacking the financial skill set to do so.
According to a recent poll by Bankrate, 41% of Americans would be unable to cover a $1,000 emergency with money from their savings. Although this data-point encapsulates all Americans, the issue is more acute among certain demographics. Practicing sound money management remains an issue divided by class, and often, race. For many on the lower end of the socioeconomic spectrum having an emergency fund, investing, and saving for retirement are luxuries they simply do not have. There is still much work to be done to address the structural wealth inequality that exists in our nation. These statistics continue to reinforce why organizations like D.R.E.A.M. are needed in our communities.
Usually we host a series of events during the month of April to celebrate Financial Literacy Month to gather folks in community to discuss important financial topics. But since we are practicing social distancing, I am going to share some tips to help you master your finances while quarantining.
1. Watch Online Content from Khan Academy – get quick answers/tips to your many personal finance questions. Parents, if you are looking for a daily activity for your child at home, start here. Best for: Parents, Teens, Young Adults
2. Play Monopoly – one of the most iconic board games is also one of the best financial literacy tools. Play this game with children or adults, the positive results remain the same. Best for: Parents, Children, and Adults
3. Reduce Unnecessary Expenses – Review your checking account/credit card to see what expenses you have on autopay and if any of them can be reduced, suspended, or completely eliminated. Items such as commuter passes, music streaming, or gym memberships are good places to start. Best for: Adults
4. Create or Grow an Emergency Fund – the current pandemic has caused rising unemployment thus highlighting the importance of having an emergency fund. If you do not have an emergency fund established, set one up today. Analyze your spending from February (or before your respective city adopted social isolation) and identify expenses that you no longer incur. The money that you are saving by not buying that Starbucks latte, eating lunch from the local food truck, or not attending the happy hour drinks after work can now be allocated to start or grow your emergency fund. My advice is that you choose a high yield savings account to add a little boost to your savings. The goal is to set aside at least three to six months of your current living expenses. Best for: Adults
5. Suspend Student Loan Payments – the U.S. Department of Education has announced relief for federal student loan borrowers. Borrowers are automatically being placed in an administrative forbearance, which allows you to temporarily stop making your monthly loan payment. This suspension of payments will last until Sept. 30, 2020. (This includes income-driven repayment (IDR) plans) For private student loans, you will have to contact your respective lender to inquire about forbearance or relief they are offering as a result of the Covid19 pandemic. Best for: Adults
Bonus Tip: Analyze your current financial situation and create what I call the “cave woman/man” budget. This budget outlines the lowest possible cash amount needed for you to survive on a weekly or monthly basis. This budget includes just the basic necessities such as rent, utilities, and groceries. (Sorry, your Netflix subscription doesn’t make the cut) If you face an unexpected job loss or financial emergency, this is now your baseline. Best for: Parents, Adults
About the Author: Femi Faoye is the Co-Founder and Chief Executive Officer of D.R.E.A.M. He’s a staunch and passionate financial literacy education advocate. You can follow his insights on twitter @Femi_Faoye.
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