5 Poor Money Habits Americans Learned as Kids That They Need To Break
Financial literacy has never been a big priority in America, and it has real and lasting consequences. According to data from a recent Ramsey Education report, 88% of U.S. adults said high school did not leave them “fully prepared” for how to handle money in the real world, and only 17% said they even took a personal finance class in high school.
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This lack of education leaves gaps that tend to be filled with poor money habits that prevent Americans from achieving financial independence.
To dig deeper into the issue, GOBankingRates conducted a survey of 1,008 Americans between March 26 and April 1 regarding a number of financial topics. One of these questions was, “What poor money habits did you learn during your childhood?” Here are the five most frequent responses.
Not Prioritizing Saving
Nearly 40% of respondents said not prioritizing savings was one of the bad money habits they had to unlearn. This was the most chosen option in the survey — and understandably so.
Building a retirement nest egg — or even saving for short-term goals — requires planning, dedication and effort. Without a financial education, it can be hard to accomplish.
Many Americans try to save what money they can at the end of the month, after paying bills and covering day-to-day expenses, but unfortunately there’s usually not anything left by that point. A better strategy is to “pay yourself first” by directing money toward saving as soon as you receive your paycheck, then learning how to live off what remains.
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Impulse Shopping
Impulse shopping was cited by 37% of respondents as a bad money habit they’re still trying to shake, the second-most popular response. It’s a natural response to want to buy what you want when you want it, but unless that habit is restrained, it can lead to long-term financial problems.
Without financial literacy training, it’s all too easy to view money as something you’re supposed to spend, not save or invest. This is what typically leads to impulse spending.
To help control this, it’s essential to create a budget. A budget will track your money as it comes in and goes out, so you’ll understand exactly where you’re overspending and will have to cut back. Once you understand the delicate dance between income and expenses, you can make the choice to spend more money on discretionary purchases — you’ll just have to cut back somewhere else in your budget.
Not Building an Emergency Fund
An emergency fund is the cornerstone of any financial plan; but, without financial literacy training, it’s easily overlooked. Over 35% of survey respondents said they had not built emergency funds, indicating it’s a common problem.
Without an emergency fund, life’s surprise expenses tend to end up on credit cards, where they can grow rapidly thanks to high interest rates. To prevent this, aim to sock away at least three to six months of expenses into a savings account. This should be sufficient to cover common emergency expenses ranging from car or home repairs to uninsured medical costs. A significant emergency fund can also act as a safety net in the event of job loss.
Not Creating a Budget
Most Americans have heard that they should create budgets, but 34% of respondents indicated they still needed to adopt this habit. As shown above, a good budget can help prevent impulse spending, but it can also reduce a lot of financial stress in your life.
Many Americans struggle with wondering where all of their money goes every month, but a good budget will show you. It also can provide a sense of control, as you can tweak your budget to boost line items that you prioritize, such as saving and investing.
Most people who don’t budget are surprised when they learn exactly how much they spend on things like eating out, streaming services or miscellaneous shopping. But knowing these things allows you to make better financial choices in your life.
Using Credit Cards Too Much To Buy Things
Roughly one-third of respondents acknowledged that they use credit cards too much. Credit cards aren’t inherently “bad,” but you have to know how to use them properly, which is where the lack of financial literacy training makes a difference.
Credit cards can offer lucrative rewards, such as airline miles, hotel points or cash back, but they also carry exorbitant interest rates, currently averaging in excess of 21%, according to the Federal Reserve. This means you should use a credit card only if you already have the money to pay off your charges in full.
Another thing to watch out for is the tendency to overspend using credit cards. When you pay cash for purchases, there’s a visceral feeling of money leaving your possession, and that can restrain spending. But with a credit card, it can feel as if you have unlimited funds, making it all too easy to spend more than you plan.
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This article originally appeared on GOBankingRates.com: 5 Poor Money Habits Americans Learned as Kids That They Need To Break
