.png)
April is Financial Literacy Month. Being financially literate means having the knowledge and skills to make informed financial decisions. Yet, according to FINRA, about 66% of the American population is considered financially illiterate.
Lawyers play a crucial role in guiding clients through an extensive list of financial matters – and that list is not limited to those who only practice business law. At a minimum, a familiarity with, but ideally a robust understanding of these things is important:
Personal financial statements
Corporate financial statements
Accounting principles
Audits
Audit reports
Annual corporate reports
Business financial reports
Income taxes
Business taxes
Present value calculations
Amortization
Financial markets
Stocks
Bonds
Investment vehicles
Bank accounts
Financial tools
Financial planning
Budgeting
Budget reports
Financial literacy is essential for everyone, and there are legal implications of financial ignorance. As lawyers, we have an ethical duty to our clients to continuously sharpen our financial literacy.
Understanding the Importance of Financial Literacy
Financial literacy encompasses a deep and wide range of skills and knowledge to manage personal and professional finances effectively. It includes understanding concepts such as budgeting, credit scores, saving, investing, taxation, borrowing, managing debt, and the ability to use financial products and services – including the technology that powers those products and services. A financially literate lawyer is better equipped to help his client navigate their personal and professional financial situation. Lawyers must be able to effectively communicate these concepts so that their clients can make sound decisions that align with their immediate and long-term case goals.
Legal Implications for Financial Illiteracy
Individuals who lack basic financial knowledge may find themselves facing legal consequences such as bankruptcy, foreclosure, debt collection or falling victim to financial scams and cyber breaches. For lawyers, addressing these dilemmas often require not only legal expertise but also a fundamental understanding of a client’s financial situation – especially when the client lacks self-awareness. Having financial literacy could make a significant difference in both the outcome of your case and the efficiency with which it is handled.
The Lawyer Demonstrating Financial Literacy for Others Yet Not Themselves
It’s ironic when attorneys who deal with price/earnings-to-growth ratios and average cash conversion cycles are not aware of the exact income needed for their retirement. Do you know how much income you need to save to achieve your personal retirement goal? Your budget and investment strategy should pivot if you leave a higher paying partnership with challenging hours to accept a lower paying role with a better work/life balance.
Alabama and Tennessee Legislation on Financial Literacy
In accordance with Ala. Code § 16-40-12, when Alabama public school students enter the ninth grade in the 2024-2025 school year, each student will complete a course in personal financial literacy and money management before graduation from high school.
Before June 30 of this year, in accordance with § 16-35-4, Code of Alabama 1975, the State Department of Education intends to identify approved financial literacy courses that will fulfill one unit of math class credit for high school graduation. No later than June 30, the State Department of Education will create an exam that focuses on the standards of the approved financial literacy course.
Tennessee has required personal financial education for high school graduation since 2013. Each TN student must complete a half semester class on personal finance to graduate.
This legislative mandate highlights the need for financial literacy education from an early age.
Local and Online Financial Literacy Resources
There is no need to be disheartened by what you don’t know. The one thing we all learned in law school is how to learn. Identify what it is you want to know, research the most-effective means of learning it, and then do it. You’ll be a convincing expert in no time. We did some preliminary research on local and online financial literacy resources so that you don’t have to do so much legwork…
5. YouTube: What is Financial Literacy & Why It’s Important
6. Podcasts: The Twenty Best Financial Podcasts of 2024