Contributor: Financial Empowerment Is More Than Financial Literacy
This week KFEC is featuring OJ Oleka, PhD. He is the President of the Association of Independent Kentucky Colleges and Universities.
Last summer, I became a Dad. It has been the most humbling and rewarding role ever. A joy of fatherhood is watching my daughter develop. A few months ago, we taught her how to place plastic coins into the belly of her toy piggy bank. We love watching her face light up after each inserted coin, as she claps her hands and squeals with delight. What she does not realize is that these are the first steps towards financial empowerment. Financial empowerment is a transformational way of life, consisting of three key parts: financial literacy, educational attainment, and civic engagement.
Financial literacy means knowing the importance of how finances work within society. That includes understanding budgeting, living within your means, debt, and government action. A budget is a visualization of how much money is earned (job income, college scholarship, allowance, etc.) and spent (bills, groceries, entertainment, etc.) during a certain period of time. Living within your means when you spend less money than what you earn. This should be reflected in your budget. Debt is when you spend more than you have, and money is owed. It is important to stay out of debt whenever possible. Government action is a bit trickier, but governments and related agencies can impact money by spending it, taxing it, changing its value by changing interest rates, or diluting its value by printing more of it. Each of these financial literacy concepts become easier to master, and money itself is likely to become more available, if someone has attained a strong education.
Educational attainment is reaching the highest desired level of educational opportunity after all pathways are made available. In Kentucky, according to the Council on Postsecondary Education, a bachelor’s degree from college can help someone earn, over the course of their lifetime, a million dollars more than someone who did not get a bachelor’s degree. College is not for everyone, but a credential of some kind is a great financial investment that can lead to economic mobility and a better quality of life. It can also lead to civic engagement.
Civic engagement is an investment in community through time and finances. Donating to a charity can help provide a service to those who need it; taking the time to vote in elections or volunteer for a cause can strengthen community outcomes like public safety, educational opportunity for kids, and economic mobility for low-income families. All these things ensure more people can become financially empowered themselves.
Financial empowerment is critical to Kentucky’s long-term stability. Each generation must be more financially empowered than the previous. I am doing by part, by making sure my toddler puts her plastic coins in her piggy bank. Soon we will be taking her to school and teaching her the importance of being involved in her community. We each have a role to play. Check out the resources from the Kentucky Financial Empowerment Commission on how you can achieve financial empowerment for you, your family, and your community.
