Lack of financial savvy will cost Americans $1,819 in 2022

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Giving up is a lot of money.

It’s unfortunate that personal finance is a topic that isn’t typically taught in schools (although many legislators are fighting to change it, and 25 states are actually pushing to include personal finance in school curricula). legislation). Even more disappointing is that lack of personal finance knowledge can end up costing consumers money.

A recent study by the National Financial Educators Council found that by 2022, the average consumer will lose $1,819 due to lack of financial savvy. That’s a scary amount to lose at a time when the cost of living is so high.

If you feel you don’t have the financial education you deserve, it’s never too late to get one. There are plenty of online resources you can tap to learn more about everything from budgeting to establishing a savings plan. But for now, here are three basic financial tips that may help improve your personal situation.

1. A savings account is a great place to store cash in an emergency

This will actually be a 2 on 1 lesson. First, you should aim to have an emergency fund with enough cash to cover your necessities for at least three full months. Without it, you may quickly neglect your obligations or fall into debt if you lose your job.

On the other hand, the best place for emergency funds is none other than a savings account. That way your money is protected and you can earn interest even while you’re not using it.

2. Credit card balances can be very expensive

Many people don’t realize how much it costs to roll over their credit card balance instead of paying it off in full each month. When you put money into your savings account, you earn interest. That’s extra money you can keep. Interest accrues when carrying credit card balances. It is the money you pay and is held by your credit card company.

To make matters worse, many credit card companies compound interest daily. This means that every day, if you don’t pay your balance in full, it will cost you more. Therefore, if you use a credit card, please do your best to pay the balance in full on time.

3. It’s profitable to invest money you don’t need for emergencies or short-term goals

Any money you allocate for emergencies or goals you want to achieve in the next five years should be kept in a savings account. But for long-term goals, investing in a brokerage account or IRA is probably better.

With one of these accounts you can earn double your money. Investing also carries the risk of losing money that is useless if you stick to a savings account, but tends to be worth investing in because of the monetary benefits.

How do you choose between a regular brokerage account and an IRA? You need to think about what you’re investing for, what tax benefits you’re looking for, and how much flexibility you need with your money. You can withdraw anytime from your regular brokerage account without penalty and invest any amount you like.

The IRA is subject to contribution limits that change annually and penalties for withdrawing funds before reaching age 59½. This is because the IRA is an account specifically designed to help with retirement savings, and the IRS doesn’t want to tap that account prematurely. But in exchange for agreeing to these rules, investing in an IRA will give you a tax break on your money.

with Traditional IRA, your donation will not be taxed.with Ross IRAwithdrawals are not taxed. Either way, you benefit financially.

Staying in the dark about your personal finances can cost you money. Do your best to address any knowledge gaps so that you don’t struggle financially.