Financial Literacy: What You Need to Know

An employee of a bank counts U.S. dollar banknotes at a branch in Hanoi, Vietnam, on May 16, 2016. Kham/Reuters

A survey by Standard & Poor’s found that only 57 percent of U.S. adults are financially literate. For the rest, this could translate into poor personal finance decisions. But there’s a plan to aid in overcoming this knowledge deficit.

Congress established the Financial Literacy and Education Commission (FLEC) in 2003 as part of the Fair and Accurate Credit Transactions Act (P.L. 108-59). As a result, My Money Five was developed as a resource and plan for those struggling with understanding finance.

My Money Five Principles

The goal of My Money Five is to increase financial literacy. It does that by establishing and explaining five principles. These include:

• Earn
• Save and invest
• Protect
• Spend
• Borrow

These basic principles are thought to help make day-to-day decisions regarding personal financial goals. They are considered building blocks to managing and growing wealth.

Earn: Understanding Pay and Benefits

My Money Five explains that understanding a paycheck is the first step to sound finances. So take the time to learn your paycheck’s details, including deductions. Review and understand what taxes are withheld. This includes Social Security and Medicare taxes.