5 Key Pillars of Financial Literacy

Shockingly, 66% of Americans are considered financially illiterate, according to the Financial Industry Regulatory Authority (FINRA). But what does that mean exactly? Financial literacy just means that you know how to make SMART decisions with money. Not your parents or another adult in your life. You.

That said, you don’t have to be a mathematician or financial planner to manage your finances. It's a relatively straightforward formula, but what you do need is discipline. Here are the five pillars of personal financial literacy, laid out in a formula:

Earning = Budgeting + Saving & Investing + Borrowing + Protecting Assets

The earlier you learn the basics of how to manage your money, the more confident and successful you’ll be with your finances later in life. So let’s dive in to understand these key pillars.

Pillar 1: Earning

Before you can do anything with money, you need to earn it first because you can’t manage money you don’t have. Therefore, financial literacy lessons begin with learning how to generate sufficient income, which the majority of Gen Zers are ill-advised on how to do. 

Image source: gflec.org

And we don’t just mean enough income to get by and live paycheck to paycheck. At uThrive Academy, we want to help you, well… THRIVE!  That means helping you discover your vocational calling and aligning it with an in-demand occupation that pays a livable wage. 

You’re going to be spending on average over 75,000 hours of your adult life working, so we want to help you do something you love AND get paid well for it. The key phrase here is a livable wage, which is the income you need to cover necessities, discretionary expenses, and still pay yourself!  

Knowing how much you need to live comfortably will differ from person to person and depends primarily on 3 factors, which we help you walkthrough and make a practical career plan in our ultimate personal finance course. 

Not only do we help you with career guidance, we equip you to get the job with job search, resume, cover letter, and negotiation resources. Last but certainly not least, we educate our youth on how to keep the job through soft skill development - a key trait recruiters said is lacking in young people today. 

Pillar 2: Budgeting

It’s not enough to earn an income, although that’s an essential first step.  In fact, you can be making good money and can still end up broke because you don’t know how to manage it. The key to controlling your money, instead of the other way around, is through budgeting. 

A budget is a proactive and realistic plan that outlines ALL your spending each month. That includes your saving goals! It’s not just looking at your bank or credit card statements reactively, if you even do that.

Only 1 in 3 Americans prepare a detailed household budget, and of those that do, a whopping 84% say they still overspend and exceed it! Imagine those that don’t even track their spending!  

Realistic budgeting is the first step to getting ahead long-term so you’re not going into the red every month. That adds up fast, trust us! You can’t just do it in your head, and intentionally ignoring your checking account out of fear to see the balance, which almost half of Americans do, will only make it worse! 

It’s actually not hard to get started. It can even be cathartic for those type A personalities who like to be in control. Anyone? Just us?! In our ultimate course, we help you to understand the psychology behind spending and tackle the largest expenses in your life like housing and transportation. We equip you with a vast array of budgeting tools to make it easy, because it really is with today’s technology.  

Pillar 3: Saving & Investing 

Without a realistic budget in place, it’s hard to implement the third pillar: saving and investing. And without this pillar, it is close to impossible to get substantively ahead financially long-term. The problem is the average American can only answer 55% of basic saving-related questions correctly, according to a TIAA Institute-GFLEC Personal Finance survey. 

The results: More Gen Zers in particular are intentionally avoiding saving in favor of YOLO spending on luxury items and travel. Roughly 28% of Americans have less than $1,000 in savings, and more than 1 in 3 Americans (36%) have higher credit card debt than emergency savings! 

We love our young people, but this is a terrible financial strategy. At uThrive Academy, we talk about the importance of paying yourself first and helping young people build up an emergency rainy day fund of 3 to 6 months worth of living expenses, so when unexpected things happen, they will be ready.

Building that foundational nest egg will enable them to really start building wealth as they’re able to save for other long-term financial goals like buying a car or house, starting a business, and retiring comfortably. This is where investing can be a gamechanger and exponentially grow wealth. 

The TIAA Institute-GFLEC Personal Finance survey shows that investing is among the top 3 personal finance topics an average American is most ignorant about. On average, only 45% of Americans answer investing-related questions correctly. 

We demystify the challenges of investing by providing a foundational knowledge of the topic and teaching about the power of compound interest, which makes your money work for you without you lifting a finger. Who doesn’t want that?! 

Pillar 4: Borrowing

The topic of borrowing and debt is a rather divisive issue in the finance world. Whether it’s a good or a bad thing to take on depends on who you ask. Financial gurus like Dave Ramsey, who never borrows money “for any reason,” will tell you to cut up your credit cards and rely solely on cash. 

Here at uThrive Academy, we take a more nuanced and practical approach to debt. The reality is the cost of living is skyrocketing, and we all will most likely end up borrowing at some point in our lives. So rather than judging those in precarious situations, we’d rather teach you how to take out debt wisely–and pay it off! 

With only 59% of Americans able to answer basic debt-related questions correctly, it starts with getting a proper education of how debt works and the various types available, like secured and unsecured loans. Not all debt is created equal. It also means understanding the importance of credit scores and how that number impacts almost every part of your financial life.  

But regardless of whether it’s good or bad debt, uThrive has the tools and roadmap to help you to pay it in FULL. At the end of the day, debt can be an expensive financial burden that accrues interest and can prevent you from getting ahead! This is a huge issue as the average American owes about $104,215 across mortgage loans, credit card debt, student loans, auto loans, and personal loans. The borrower is slave to the lender, and we want you to experience financial freedom!

Pillar 5: Protecting 

You can follow each of these prior pillars almost perfectly and still undermine your financial stability without this last pillar in place. It is crucial to protect the assets you’ve worked so hard to earn and save. We all thought we were invincible when we were younger, but with age comes a realization - we’re sadly just fragile mortals. That’s why we say:

Expect the Unexpected and Protect Yourself!

Protecting your assets can take a variety of forms, but for uThrive Academy, we examine core topics like relationships, insurance, identity theft, and estate planning. 

Relationships? Yes, absolutely. Financial stress is the leading cause of divorce in America, and a financially irresponsible partner can inflict serious damage to your financial and emotional stability. Yes, you need love, but you also need the financial tools and education to protect yourself and your relationship so you can truly thrive together in adulthood. 

At the same time, insurance (car, home, renters, medical, disability, life, etc) is essential for your protection. While an emergency fund can take care of small emergencies like car maintenance, it almost certainly won’t cover major incidents like a car accident, surgery, theft, or property destruction. And trust us, it happens! 

According to a Commonwealth Fund report, about 43% of working-age adults are inadequately insured. A Census Bureau report shows that 26 million Americans (7.9%) are not insured at all! 

Then there are increasingly popular forms of fraud, like identity theft, which has become one of the most common economic crimes in the U.S. over the last decade. Millions of Americans are victims of identity theft and billions of dollars are stolen every year, and this number only continues to go up. Our education teaches you how to avoid this! 

And, of course, you do not want your family to fight over your assets after your death. Estate planning lays down how your assets are going to be distributed amongst beneficiaries after your death and names guardians for minor children so they are well taken care of.

Whew, you made it through the five pillars. This is pretty comprehensive, isn’t it? If you like what you’ve read, you’ll like Getting Ahead: A Roadmap to Career Clarity & Financial Freedom. This is the overview of what you’ll expect to learn with our ultimate online course for young people. With lifetime access, this is a long-term resource they can come back to and complete when they get time!

And best of all, they will be empowered to navigate the financial world more confidently and ‘adult’ more successfully. Check out the course below.