Importance of Personal Finances
Liberty University Online
ACCT 301-B08 LUO
According to the National Financial Educators Council, youth across America are slowly becoming illiterate when it comes to their personal finances. A study was introduced by Beierlein & Neverett (2013) through Harris Interactive for the National Council of Economic Education that stated, “Participants, 3,512 adults aged 18 and above and 2,242 students in grades 9-12, took a 24 question quiz on economics and personal finance. The adults surveyed scored an average grade of 70%, while the students ' average was 53%. Nearly 30% of the adults and 60% of the students failed the quiz. Ironically, although 97% of the adults…show more content… Time and time again, youth are demonstrating a major lack of knowledge within the one area that they will deal with for the rest of their lives. An understanding of one’s personal finances are crucial to the development and maturity of one’s self, family, and lifestyle. To reach one’s capabilities, fiscally, is determined by their understanding of Cash flows, income, cost effectiveness, timing, and investments.
Cash flows are very simplistic. One can think of it as the income and outgo of one’s financial success and liabilities. Merriam-Webster defines cash flows as,” the movement of money in and out of a business.” One can also consider and apply this to their personal finances. Thinking on things such as, “How much money is made?” and “How much money is spent?” According to Richard and Anna Linzer (2008), they describe the cash flow concept as,” Cash flow thinking involves focusing on the arrival of revenues and the departure of expenditures that occur during an institution’s fiscal year (3).” Again, making this concept personal, an individual can break this down to how much of a paycheck will come in and how much money does one need to pay out for bills and other expenditures during that pay period or fiscal year. To be able establish literacy of one’s personal finances, there must be an understanding of the liquidity of funds such as cash flows. Ultimately, understanding cash flows helps to motivate a budget.