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
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.You should learn which workplace benefits, like a 401(k) or flexible spending account, are available. Take advantage of any pretax benefits that are available. Lowering your tax burden puts more money into your wallet.
It sounds basic, but knowing what part of your paycheck you keep helps you make decisions in all aspects of your life.
Save and Invest: It’s Never Too Early
Regardless of age, saving or investing is never too early a habit to start. This routine can send you down a successful road. Even if you’re only putting a few dollars away a month, it still can help.My Money Fives suggests starting with paying yourself first. In other words, put a certain percentage of your paycheck away before you spend it.
It also differentiates saving and investing. It suggests consulting with a qualified financial advisor when making investments.
Protect: Accumulate Emergency Savings
It’s essential to take precautions regarding finances. My Money Five stresses the importance of accumulating savings for emergencies.Consider buying insurance that meets your needs. This includes health insurance, home insurance, and life insurance.
Be vigilant when it comes to fraud, scams, and identity theft. Keeping your financial records in good order will help. Look at your bank statements and bills as soon as you receive them. Note and report any discrepancies or suspicious activity. For example, an unauthorized withdrawal should be reported immediately to your bank or credit union.
Spend: Receive Good Value
The first step to spending is living within your means. But spending is inevitable and should be worked into any financial plan. This is where a budget works. My Money Five suggests setting maximum amounts you plan to spend monthly. Track your spending. And look for a good value on large purchases.But a good value doesn’t mean purchasing unneeded items just because they are on sale or you have a coupon.
Borrow: Use Credit Wisely
Although sometimes it’s necessary to borrow to make a large purchase, over-borrowing or using too much revolving credit can hurt your credit.When borrowing, it pays to shop around. It’s okay to negotiate terms when possible.
Learn about credit, and pay attention to your credit score and history. In addition, My Money Five reiterates the importance of paying bills on time.
FLEC Oversees My Money Five
The original vision of FLEC was sustained well-being for American individuals and families. It set strategic direction for:- policy
- practice
- research
- coordination
This commission is made up of 19 agencies. The secretary of the Treasury chairs it. The vice chair is the director of the Bureau of Consumer Financial Protection. The commission is coordinated by the Department of the Treasury’s Office of Consumer Policy.
FLEC Diverts from Financial Literacy
Although the FLEC developed My Money Five, and is about financial literacy and education, in October 2021, the commission took a turn. It launched an effort to study the impact of climate change on households and communities. This was in conjunction with the Biden administration’s whole-of-government approach to addressing climate change.The commission will study “how households, communities, and the smallest businesses experience financial resilience in the face of climate change and climate transition, supported by resilience-supporting financial products and financial infrastructure supporting environments.”
The FLEC has also been charged with mapping out climate-related risks and identifying which regions and groups will be impacted.
The result will determine which tools and best practices might be effective at addressing vulnerabilities and risks. Implementation practices will also be addressed.
My Money Five a Blueprint
My Money Five is basically a blueprint for financial success. It sums up what is needed to promote personal finances. It comes under the FLEC, which was originally tasked with promoting financial education.Following the five principles of the My Money Five may help many Americans achieve financial success.
