Financial Education: What Is It and What Makes It So Important?

“Results from the Federal Reserve Bank of Cleveland’s Community Affairs survey.”

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Description

The need for financial education—knowledge that helps

people make sound, informed financial decisions—has become

increasingly important for financial institutions and community

economic development practitioners. Rising consumer debt and

low household saving rates show Americans’ growing need for

financial education, as do other indicators (see below).

Why is the need for financial education so pressing?

Today’s consumers are no less knowledgeable than past generations;1

rather, quickly accelerating changes in the financial

services market have increased all Americans’ need for financial

literacy, regardless of income or educational background.

Consumers must choose from a wide array of providers and

complex new financial products, and they have become more

responsible and involved in asset building and retirement

planning. Long-term investments that affect future financial

well-being require deliberate, informed decisions. Demographic

changes—such as new immigrant populations, a growing

proportion of elderly in certain regions, baby boomers preparing for retirement,

and college students graduating with debt—highlight the need for all populations

to understand the basics of planning for their financial present and future.

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