Financial Literacy Month: Building a Better Economic Future for All

Financial literacy plays a crucial role in increasing economic opportunity for all. That’s why Financial Literacy Month is so essential. It brings economic inequity to the forefront. In fact, both financial literacy and financial wellness are crucial to economic stability and success, but many don’t know the difference between the two.

· Financial literacy refers to the knowledge and skills necessary to make informed financial decisions.

· Financial wellness includes the state of your overall personal finances and your ability to manage it effectively, including budgeting, saving, investing, and managing debt.

The COVID-19 pandemic highlighted the critical role that Minority Depository Institutions (MDIs) play in promoting economic equity and stability, particularly in underserved communities. MDIs are banks that are either minority owned or operated and primarily serve communities of color. MDIs held approximately $330 billion in assets in 2022 and serve millions of customers. These institutions provide banking services to individuals, small businesses, and communities who may not have access to or who are underserved by mainstream banks. Minority banks provide affordable checking and savings accounts, small business loans, and financial education programs. They increase access to reliable and responsive banking services, which builds wealth and creates economic opportunities for underserved populations.

The pandemic further elevated their importance in promoting economic equity and stability, especially for unbanked and underbanked populations. As these individuals may not have access to traditional banking services, they are at a higher risk of financial insecurity during economic downturns. The pandemic and the racial awakening of 2020 brought to the forefront (yet again) economic disparities that have been present in our society for far too long. As the pandemic disproportionately affected minority communities and low-income households, it highlighted the need for policies and programs that address inequality. One way to address this issue is by supporting financial wellness and literacy programs.

By supporting these programs, individuals can learn to effectively manage their finances, leading to changed banking behavior and greater economic stability and success. They can learn skills such as budgeting, saving, investing, and managing debt. However, for many, financial literacy is a challenge. According to a 2019 report by the National Financial Educators Council, only 24% of Americans have a basic understanding of personal finance. Limited financial acumen can lead to poor financial decisions. Minority banks play a vital role in addressing this issue by providing access to financial education programs and services that empower individuals to make informed decisions for themselves and their families. As individuals and communities continue to navigate the changing economic landscape, supporting these banks is more critical than ever. The National Bankers Community Alliance (NBCA), the National Bankers Association’s nonprofit arm, was founded to provide programs and services to support their crucial work and the communities they serve.

There has never been a better time to support financial literacy and MDIs. This not only benefits underserved communities but the U.S. economy as a whole. Strong economies need a healthy middle class. And the ability for all its citizens to have opportunities to improve their well-being.