Monthly Finance Message:

Twelve Principles of Personal Financial Literacy

November 2007

Barbara O'Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers NJAES Cooperative Extension

The Jump$tart Coalition for Personal Financial Literacy is a Washington DC-based organization that seeks to improve the financial literacy of young adults by promoting the teaching of personal finance. Several years ago, the Jump$tart Coalition released a list of 12 "must-know" personal finance principles that are valuable for people of all ages. Below is a brief description of each principle:

  1. Know Your Take-Home (Net) Pay - Before committing to significant expenditures, estimate how much income is likely to be available to you after all mandatory deductions.
  2. Pay Yourself First - Before paying bills and other financial obligations, set aside an affordable amount each month in accounts designated for long-range goals and unexpected emergencies.
  3. Start Saving Young - Recognize that your total savings are determined both by the interest you earn on savings and the time period over which you save.
  4. Compare Interest Rates - Obtain rate information from multiple financial services firms to get the best value for your money.
  5. Don't Borrow What You Can't Repay - Be a responsible borrower who repays as promised, showing that you are worthy of getting credit in the future. Before you borrow, compare your total payment obligations with income that you will have available to make these payments.
  6. Budget Your Money - Create an annual budget to identify expected income and expenses. Including savings. This will serve as a guide to help you live within your income.
  7. Money Doubles By "The Rule of 72" - To determine how long it will take your money to double, divide the interest rate into 72. For example, an account earning 6% interest will double in twelve years (72 divided by 6 equals 12).
  8. High Returns Equal High Risks - Recognize that no one will pay you high interest rates on a sure thing. In most cases, the higher the interest rate offered, the higher the risk of losing some, or all, of the money you invest. Diversification is the best hedge against investment risk.
  9. Don't Expect Something for Nothing - Be leery of advertisements, sales people, or other sources of financial offers promising anything free or guaranteed investment returns. Like non financial opportunities, "if it sounds too good to be true, it probably is."
  10. Map Your Financial Future - Take time to list your financial goals, with a specific time deadline and dollar cost, and develop a realistic plan for achieving them.
  11. Your Credit Past Is Your Credit Future - Be aware that credit bureaus maintain credit reports, which record borrowers' histories of repaying loans. Negative information in credit reports can affect your ability to borrow at a later point.
  12. Stay Insured - Purchase insurance to avoid being wiped out by a financial loss, such as an illness or accident. An insurance plan should be part of every personal financial plan.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences