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Increasing financial literacy key to reducing need for bankruptcy

With many Tennessee residents still struggling with the effects of the fluctuating economy (unemployment, credit card debt, inflation and growing medical expenses), one would think that Americans would be more inclined to save money. Instead, many continue to keep on spending money they do not even have. This leads to an increased rate of personal bankruptcies not just a couple hundred or thousand, but possibly millions, if Americans continue to overspend.

Credit levels among American consumers are now at more than $3 trillion. Two decades ago, that number was at $931 billion, still no small amount. Compounding this problem is the fact that many Americans have no savings. They are just a paycheck away from financial disaster, and possible bankruptcy.

What can be done to help those who are facing financial challenges? Knowledge is key. Unfortunately, very few schools teach students about how to manage finances. Many graduate from high school not knowing how to open a bank account or budget their money, so, if they do not actively seek out this knowledge, they may never learn the basics of managing money.

Knowledge is also important because the more education a person has, the more money he or she can expect to make. Everyone should invest in some sort of college education or vocational training at the very least to prepare themselves for careers. This will help them make more money and, therefore, reduce credit card debt.

By understanding the basics of money and credit card usage, consumers can learn to live within their means and avoid overwhelming debt. Consumers do not have to be financial experts, but they do need to take control of their budget and spending habits.

Source: The Motley Fool, "Residents in These 5 States Are the Least Financially Literate in the Country," Sean Williams, June 22, 2014

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