We hear it all the time. Young Americans struggle with basic concepts like budgeting, saving, interest, and debt. So how are they ever going to navigate the world of personal finance and save for retirement?
The National Endowment for Financial Education (NEFE) – an organization that supports financial education efforts across the U.S. – explains why understanding personal finance is so critical to future generations of Americans:
“We have known for some time that American 15-year-olds lag behind many other countries in financial literacy.
(But) other countries with low literacy rates offset citizens’ knowledge gaps by replacing higher rates of income through national pension systems (e.g. Social Security). But where a country like Spain covers 89 percent of a person’s working income in retirement, the American Social Security program covers only about 45 percent. Without the education to fund their own retirements, today’s high school graduates face an uncertain future.”
National Endowment for Financial Education (NEFE), January/February 2017 Digest
So let’s think through that math. When you fail to set aside your own funds for retirement in Spain, for example, or in a number of other European countries, you can still retire with almost the same level of income you had when you were working, thanks to generous government safety nets.
But in the United States, your income drops to less than half of what it was when you were working. Ouch!
So take a look at what you are earning now. Divide it in half. How well can you and your family live on half of your income?
If the answer is “not very well,” start learning more about your personal finances and get started on a savings program while you still have time to change the future.