Despite the fact that the United States has a thriving financial market and plenty of money, basic financial literacy in the US is almost non-existent. A lack of knowledge of basic financial concepts can have negative consequences for individuals and society as a whole. Among other things, a lack of financial literacy can lead to credit card debt, inadequate savings, and poor credit scores.
The first step is to get individuals “on the ball” early in life. This can be done through a range of means, such as a financial education curriculum in high schools, workplaces, or community platforms. A number of states have taken the initiative, and others are planning to do so. In fact, there are more than twenty bills that will address financial literacy in the next two legislative sessions. However, not all bills have made it through the legislative process. In Wisconsin, the bill requiring all students to take a financial literacy course failed, after objections from the Wisconsin Association of School Boards.
Another study found that financial literacy was associated with a number of positive consequences. For instance, financially literate people were more likely to report that they were able to cover a $400 emergency expense within 30 days. This is the same for having the money to get a car, buy a home, or start a retirement account. They were also less likely to incur costly credit card debt, and they had higher credit scores. In addition, financial literacy was found to be associated with more diversified portfolios.
Another study found that financial literacy may have a positive effect on the performance of college students. Financial literacy courses were shown to reduce the amount of debt students incurred, improve credit scores, and reduce the use of payday loans. In addition, teachers who led financial literacy courses saw an increase in savings.
Some of the best ways to promote financial literacy include educating young people about the benefits of saving, using credit wisely, and managing debt. These initiatives need to be scalable and should be targeted at students, especially in high schools. The best way to make sure that all students have access to personal finance is through a state-level policy. This may be the only option to guarantee that all students receive an adequate education in personal finance.
The three most important financial skills are knowing how to get a loan, how to manage your credit, and the basics of saving and spending. Taking a course on these topics can help students to avoid debt, save for college, and get a car or a home. It’s also a good way to promote the financial well-being of future generations.
The financial education industry is growing, with a range of providers offering a variety of products and services to students and their families. For example, the Federal Reserve Bank is a nonprofit organization that offers a variety of educational materials. Similarly, credit unions are nonprofit organizations that offer financial literacy resources. Next Gen Personal Finance offers free online courses and classroom study guides. In addition, the Jump$tart Coalition for Personal Financial Literacy is a nonprofit organization that advocates for financial literacy.