Do you feel like financial literacy in America is getting worse? It’s not just you. FINRA’s most recent National Financial Capability Survey revealed that only 34% of Americans could correctly answer four out of five basic questions on topics such as the effects of inflation and the impact of compound interest on loans. This survey confirms what we’ve suspected for years- our nation is facing a financial literacy crisis, and it’s getting worse.
One factor contributing to this crisis is the lack of financial literacy curriculum in our public education system. Only seven states currently require students to take a semester of personal finance before graduating, some offer it as an elective or as a component to a main course. How can we expect these kids to grow into adults who make wise financial choices about credit cards, student loans, home ownership, and investing when they aren’t taught the basics?
Another problem is the fact that this conversation isn’t happening at home. One study conducted by BECU revealed that less than one third of parents are currently talking to their kids about money. Kids aren’t hearing about money, they’re not even seeing it. With many financial transactions occurring digitally via credit card swipes and Amazon one-click purchases, money has become an invisible, intangible resource.
There are organizations addressing the financial literacy gap, such as Whatcom Dream and Junior Achievement (located in my area of Bellingham, WA, serving Whatcom County), but they struggle to get enough support. The pandemic has amplified that impact as donations were redirected to agencies providing housing and food. Financial literacy has fallen on our priority list, but as we’re now seeing, our failure to prioritize it early on has resulted in a generation of young adults who are largely ill-prepared to successfully navigate the real world.
So what do we do?
Our most powerful impact starts at home with our own kids, as early as preschool age. They may not be ready to learn about the stock market, but they’re old enough to discuss the basics of earning, saving, and needs versus wants. Consider sharing an example of when you saved up for something you really wanted, or a purchase you made that you later regretted, and what you wish you’d done differently.
We also need to give our kids the opportunity to practice. Allow them to save up for things they want with their own money. Let them experience the sting of regret when they spend it all too fast and then miss out on something they wanted to to. Leave enough of a gap between what you’ll provide and what they want that there’s an incentive to get a job and earn an income. It’s not being cruel or unreasonable! If you remove these obstacles, helping them avoid negative outcomes, you are stripping them of the opportunity to develop their own work ethic and learn resilience, not to mention making them less hirable when they do decide to enter the workforce.
Even if you’re not a parent, our community needs your support. If, like me, you’re concerned about the financial literacy situation, consider joining Junior Achievement as a volunteer teacher in K-12 classrooms, or connect with Whatcom Dream to support the financial literacy classes they provide to adults. Perhaps you can offer to mentor a youth or young adult you know. Just start somewhere.
There’s too much at stake to wait for the government or the education system. We have the ability to make a difference, and we need to act quickly. The longer we wait, the more the lack of financial literacy will continue compounding.