Final four financial literacy tips

In between cheering on the teams in the NCAA® Women's Final Four® tournament in Cleveland, which Invesco QQQ proudly sponsors, I had the privilege of participating in a financial literacy panel for female student-athletes. It was an honor to share a stage with women’s professional basketball great Candace Parker and Fidelity Investments Senior VP Kelly Lannan for a discussion moderated by ESPN sports journalist Holly Rowe. I enjoyed sharing financial literacy tips with the hardworking student-athletes too. 

It’s fitting that the panel was in April — Financial Literacy Month. Financial literacy can make the difference between positive and negative financial outcomes. It impacts the economy, too. I’m convinced that one of the major causes of the 2007-2009 Great Financial Crisis (GFC) was financial illiteracy. Housing was at the epicenter of the crisis because many homeowners were placed in or took out mortgages they couldn’t afford or understand. Some didn’t realize how much their monthly payments would go up with adjustable-rate mortgages; some didn’t understand balloon payment mortgages. The result, the GFC, was the closest thing to the Great Depression.

We believe strongly in financial literacy at Invesco and are committed to educating the next generation of investors. That’s why Invesco QQQ created the interactive game “How Not to Suck at Money,” Official Financial Education Program of the NCAA, and why we host financial education panels like mine for students across the US.

The panel covered a wide range of topics, from budgeting to saving to investing, and included a lively Q&A. I illustrated the importance of building an emergency fund, as well as an investment portfolio, by using their colleges’ endowments as an example. An adequate endowment helped make the difference for some schools during the pandemic when lower enrollment and higher costs strained budgets. In fact, you can learn a lot about investing from college endowments, which can be the “lifeblood” of institutions. They create investment policy statements that dictate how much they allocate to different asset classes and when they rebalance allocations. These statements usually create guardrails to prevent emotional reactions to market events and are designed to support the portfolio’s growth and longevity.

This seemed to resonate with the students. I was particularly struck by — and impressed with — the student audience’s interest in how to start investing, especially when they realized the advantages of a long time horizon.

Here are my “final four” financial tips:

1. Create a plan for spending, saving, and investing. 
   A budget can help ensure that there’s money for saving and investing. It’s important to build an emergency fund in case things go sideways. Once you have one, turn to building an investment portfolio to give it a chance to grow.
   
2. Borrow smart. 
   Borrow for what you really need — at interest rates you can afford. I recommend only borrowing for “big ticket” items that can increase in value over the longer term (i.e., education and houses). And, of course, pay attention to the interest rate on debt — try to find the lowest rate possible.
3. Spend with intention.
   Think about every non-essential purchase and ask if it’s necessary. There’s an “opportunity cost” for every purchase because that money isn’t being saved or invested. For example, I always ask my kids, “Do you really need that latte? Or would that money be put to better use by investing it."
4. Continue to learn and educate yourself on finances.
   There’s so much to learn, and the investing landscape can change over time. Take advantage of all the educational resources available, including the materials produced by Invesco.

It’s OK to make mistakes — just make sure you learn from them. I left the college students with an important and universal message: One doesn’t plan to fail; they fail to plan.

Happy Financial Literacy Month!