April is National Financial Literacy Month in the U.S. and each year during this time, efforts across the country are made to teach Americans how to establish and maintain healthy financial habits. But this does lead to the question, what are we as Americans doing the other 11 months of the year regarding financial literacy?
LendingTree conducted a survey in December 2015 that asked Millennial-aged Americans and active U.S. educators what their opinions were regarding personal finance and financial literacy matters, including their opinions on financial literacy education in the U.S.
Here are some facts LendingTree found out.
Based on LendingTree’s findings, there is a strong call for further formal financial literacy education in the United States by both the younger generation as well as our current educators. As of now, over a third of Americans leave the current education system without any formal education in personal finance. But, even for those who do take some form of course that includes financial literacy, we wonder what did their curriculum cover? With only 17 states having any requirement stating students take a course that includes personal finance instruction, and only five states requiring a stand-alone course, are enough American students actually gaining enough applicable real-world personal finance skills in the classroom?
In LendingTree’s survey, Millennials and educators were asked to select their top three financial topics that should be prioritized in the classroom. U.S. educators’ leading picks included budgeting and money management (75.1%), credit cards (50.2%), and saving and investment (50.1%). Millennials prioritized budgeting and money management (64.1%), saving and investment (48.8%), and loans and borrowing (30.0%).
Many of us learn basic understandings of personal finance from our parents or family members: budgeting, saving, and spending responsibly. But what about more complex topics that most of us experience at some points in our lives? Doing taxes? Getting a mortgage? Planning for retirement? For many of us, including our parents, understanding these topics was through trial by fire. It’s a lot of “figuring it out” when the time comes by ourselves. This may work for some, but since most of us are not financial experts or have the luxury of having an expert help us, this approach can also lead to a lot of mistakes and missed financial opportunities. And if our own parents who are teaching us are not experts or have not experienced something themselves, how can they teach us or prepare us for what they themselves don’t know?
Doug Lebda, CEO of LendingTree states, “Having an early foundation in financial literacy would significantly help the average American through critical financial decisions, like saving for retirement, financing a car or buying a home. With a better understanding of basic financial concepts, not only will we be more empowered to make smarter decisions regarding our finances, but we’ll be able to ask the right questions when needed.”
While having more schools offering financial education would likely help the U.S. in terms of financial literacy, family does still play an important part in influencing our educational development and direction. As shown in the infographic, Millennials whose families discussed finance very often at home were more than twice as likely to take a finance-related course in high school compared to children from families that almost never discussed finance at home (52.0% vs. 25.4% respectively). Those who then discussed finance very often at home were also more confident as adults at managing their own personal finances, with 80% being confident and only 12% unconfident. Comparatively, for those who almost never discussed finance at home, only 44% were confident at managing their own finances, while 29% were unconfident.
Family income also appeared correlated with financial education. Those who grew up in less affluent families were also less likely to discuss personal finance at home. Only 15.5% of those who grew up in a household with an annual income of less than $25,000 (17.3% of respondents) discussed finance either often or very often at home. Comparatively, 28.7% of family households who earned over $100,000 annually (25.0% of respondents) discussed finance either often or very often.
Unfortunately, this creates a problematic issue in America. Those who are most likely to be affected by money or cash flow problems are also the least likely to talk about finances or financial literacy. But by not discussing and understanding the issues, this can only further worsen the financial literacy problems for those who are less affluent. Whether this pattern is due to a greater issue of educational resources being less available in lower income areas or other socio-economic issues is up for debate.
“The approach towards personal financial literacy in the United States is currently very reactive, instead of being proactive,” says Doug Lebda “Instead of having an ingrained understanding of basic financial and economic concepts, some Americans are forced to find less-than-ideal solutions when met with financial roadblocks.”
What Does it All Mean?
While there does appear to be room for Americans to make an effort to be more proactive in their own financial understanding, before money problems occur or before money is available to them, not having a basis of financial literacy can make it difficult to ask the right questions to become more knowledgeable. What do you ask or know what to ask if you don’t have the financial foundations? With 88% of millennials and 90% of American educators agreeing personal finance curriculum should be required in high school, it looks a large voice wants to see active changes as to how the U.S. approaches financial literacy education in the near future.
Do you agree financial literacy education should be expanded in the U.S.? Please share and comment below!