To say there is a real need in America for financial literacy would be an understatement of the highest order. Furthermore, there is a serious need for proactive financial literacy; which is to say that it should be acquired by all people earlier, much earlier. With all the publicly available data on how average citizens are faring financially, it is curious to me, that no aggressive legislation has been put into place to require all schools, k – 12, to take financial literacy courses.
Witnessing Financial Illiteracy
In the not too distance past, I managed a team of financial education counselors for one of the largest Non-Profit organizations committed to improving lives through financial education. During this experience I witnessed countless individuals across the country who were in dire financial straits due to a lack of fundamental financial education. I experienced homeowner’s losing their homes because they didn’t have the appropriate money management knowledge prior to purchasing their home. Similarly, I came across individuals who had to claim bankruptcy because they didn’t fully understand the power of interest, as something that can work against you as easily as it can for you. I also witnessed people’s lives become rapidly chaotic and needlessly unstable all because they never learned the importance of creating something as simple as an emergency savings fund.
Reactive Financial Education
During my years of service with this organization, I couldn’t help but to think how reactive the financial education we were providing was. We would help individuals smooth over some of the roughest times of their lives by providing them with financial education; unfortunately, it was typically after they experienced significant financial loss or damage to their credit. Granted, the financial education we were providing was necessary, ultimately keeping people from losing everything they had. Of course it was frustrating to know all too many of the people that we actually helped, unnecessarily ended up losing what many of us should consider way too much.
My take, is that had the majority of the people we were helping had some form of solid financial education acquired early on in their lives (proactive financial literacy), many of them would not have had to come so close to losing just about everything they had. It’s not too far of a stretch to say that with the appropriate early financial education, there is also a chance that they would have never ended up in the dire financial situations that they found themselves in.
The State of Our Nation’s Financial Well-being
One doesn’t have to work within the financial education industry to see how financially illiterate a large portion of Americans are, especially when one considers some of the recent facts on how the general population is fairing. For instance:
- According to the Employee Benefit Research Institute, 30% of workers in a 2012 study reported that they had less than $1,000 in savings and investments.
- The same study also showed that 60% of workers report that their total household savings and investments, excluding the value of their home and any defined benefit pension, is less than $25,000.
- In 2014, the Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling, 61% of U.S adults admit to not having a budget.
- According to the Federal Reserve, the average credit card debt per household in 2014 thus far, is $7,087; yet, the average credit card debt for all indebted households is $15,191.
- TheConsumer Protection Financial Bureau found that of every dollar put toward financial education, $25 is spent on financial marketing. To a large extent, this means that consumers are not receiving the unbiased financial information needed to make informed financial decisions.
The current state of our nation’s financial well-being is the result of our collective focus on financial literacy. Needless to say, when considering the few statistics provided, our collective focus isn’t all that focused. It’s obvious that more needs to be done to ensure we are a nation of financially literate and prosperous citizens.
The Solution = Proactive Financial Literacy
So what’s the solution? Well, until policymakers create and pass legislation to enforce financial literacy as a priority to focus on in our schools, the solution is going to be up to the individuals who have the most influence over our future generations: educators, parents, and school administrators. This group of leaders will need to decide to take on the challenge of creating a financially literate nation. One of the best ways educators can do this will be for them to seize their opportunity to provide proactive financial literacy education to everyone. In other words, they must educate our youth early on, on the fundamentals of financial education. The earlier they provide the education the more proactive the push for financial literacy.
There are many effective, easy-to-use solutions available for educator to make this happen:
- My Classroom Economy from Vanguard
- The Financial Lit Kit from Apex Striving
- Practical Money Skills by Visa
What are your thoughts on additional ways that we can ensure more individuals become financially literate? What tools have you discovered to help you do this well?