When it comes to financial education, there are concerns that Americans do not know what they should. In order to rectify that situation, the U.S. Treasury has identified 5 “Core Competencies” of financial education.
The idea is to put together a plan to help Americans assess whether or not they know what they should about money. Right now, the Treasury is accepting comments on the program, and comments will be open until September 12, 2010. I think that the Treasury has done a decent enough job of breaking down the basics of money management into 5 key areas. Here are the areas that the Treasury would like to see Americans improve upon:
- Earning: Encourages you to understand your paycheck, the difference between gross and net earnings, and addresses benefits and taxes associated with your earnings.
- Spending: Learn the difference between needs and wants, and learn to track your spending so that you can create a plan and live within your means.
- Saving: Includes understanding financial assets, and banking. Also includes understanding the basics of investments, saving for retirement and building long-term wealth.
- Borrowing: Realize that compound interest works against you when borrowing, and that you have to pay back that money. Also addresses the importance of credit, and the impact of your credit score on your loans.
- Protection: Understand the importance of protecting your financial assets. Includes knowledge of what insurance you need, how to shop around for the right insurance, and how to avoid scams.
Each of these topics is kind of broad, but at the same time they provide a quick look at financial areas of your life that you should be considering. Perhaps it is a good time for you to take a look at your financial situation, and honestly evaluate your position. Look at your finances, and at your knowledge of each of the above areas. Then work to improve your financial education. It will help you prepare for the next recession, as well as help you on the road to financial freedom.