With springtime in bloom, many consider this season a time for growth and renewal. It is also seen as a time for preparation, as students finish their courses for the year and look to the future. Similarly, April is also known as National Financial Capability Month.

Initially established in 2004 as National Financial Literacy Month, this month highlights the importance of knowledge and skills that empower people to make sound financial decisions. Here’s a short history of this month of observance and how you can brush up on your skills starting today.

The Origins of National Financial Capability Month

This month-long observance originated in youth education programs. In the early 2000s, the National Endowment for Financial Education promoted a single day to raise financial literacy awareness.

Later, the Jump$tart Coalition, a nonprofit organization promoting financial education for students, declared April Financial Literacy Month. The initiative included promoting educational programs, workshops, and classes for K-12 students that discussed the importance of financial education. The movement gained attention as state governments across the country adopted April as a month dedicated to financial education and literacy.  

Federal efforts to formally recognize the observance started in 2003. The following year, the United States Senate passed a resolution designating April as National Financial Literacy Month. Ultimately, the Office of the President of the United States formally renamed the observance National Financial Capability Month in 2016.

What Is “Financial Literacy” and “Financial Capability”?

According to Investopedia, “financial literacy” is understanding and effectively using various financial skills, including personal financial management, budgeting, and investing. It’s a collection of skills that empowers individuals to make intelligent and informed decisions regarding money, spending, and saving.

At the same time, the nature of money and financial products is ever-changing. Physical currency and doing business in cash used to be the norm. However, the introduction and popularization of new transaction technologies and the prevalence of credit have changed how society views finances. These changes also required developing new skills and perspectives for financial education.

Such changes gave rise to “financial capability,” which the U.S. Treasury defines as “the capacity, based on knowledge, skills, and access, to manage financial resources effectively.” The new term and definition are meant to turn knowledge into action, a practical application of education.

For this article, we will treat the terms “financial literacy” and “financial capability” as interchangeable. They cover similar concepts, and both are used here to encourage positive financial outcomes.

The Benefits of Improving Your Financial Literacy

While National Financial Capability Month focuses on youth education and outreach, “money smarts” is a lifelong skill applicable to all stages of life.

Whether you are about to live on your own for the first time or are getting ready to enter retirement, money will always be a fixture in your life. Regularly improving your financial capability has many benefits. The advantages include:

• Improve Decision-Making: Knowing your money—where it is, where it comes from, and how much you can spend—will allow you to make meaningful decisions when saving, borrowing, and investing. Being financially capable will allow you to process information better and choose the best financial products for your situation.

   

• Prevent Mistakes: Knowing the differences between financial products, including their terms and stipulations, can significantly affect your life. For instance, being aware of interest rates and payments can stop you from taking out an aggressive payday loan or depending too much on credit to cover your living costs.

   

• Prepare for the Future: Financial capability includes planning. Learning to save in the short and long term allows you to reach your goals and anticipate obstacles. Planning also enables you to identify the most important things to you, which results in giving your money and actions purpose. Looking to the future also allows you to allocate resources intelligently.

   

• Protect Yourself From Scams: Financial capability also includes protecting your finances from fraud and unfair deals. Identifying shady business practices and disadvantageous transactions will go a long way in guarding your financial well-being and peace of mind.
  

Great Starting Points to Level up Your Financial Literacy Skills

Knowing more about your money builds confidence. It’s never too late to learn new skills and reinforce your current knowledge. You can start brushing up on your financial capability by doing the following.

First, revisit your budget. Spending money can often feel just as seamless as breathing. Review your accounts to see where your money has been going lately. Now’s a great time to identify areas for improvement.

Next, keep an eye on your credit. Using credit to pay for living expenses is on the rise. While it doesn’t hurt to count on “the plastic” in emergencies, it’s important to remember that depending too much on it might hurt your credit score and your ability to finance things like a new car or house. Remember the dos and don’ts of credit card spending.

After that, be aware of scams and what you can do to stop them. If a deal in your inbox or direct messages seems too good to be true, it probably is. Always think about protecting your financial information. Stay SAFE.

Finally, consider partnering with an experienced financial planner to gain perspective. Now is a great time to evaluate your finances and see if you are reaching your goals. Getting advice from a trusted source can allow you to see your finances in a new light and attain a stronger position for the future.

First Florida is committed to helping members enhance their financial capabilities. From savings accounts to lending products, we provide the resources to utilize your money smartly. Visit a branch today or explore our website to learn more about what we offer.