If you ask any adult educated in the U.S. whether they got a solid financial education in grade school, the answer is probably “no.”
Instead, people learn the hard way. “At 18 years old, I had a car repossessed because I didn’t know anything about money,” says personal finance author Dutch Mendenhall, also the founder of RAD Diversified REIT.
U.S. adults appear to be less financially literate than they were just a few years ago.
Only 48% of respondents were able to answer 28 personal finance questions correctly in 2023, according to the latest Personal Finance Index report from the TIAA Institute and George Washington University’s Global Financial Literacy Excellence Center (GFLEC). That’s down from the 50% average since 2017 and a peak of 52% in 2020.
How’s Your Financial Literacy? Take This Quiz
See if you can answer three sample questions provided to Forbes Advisor by the sponsors of the annual Personal Finance Index survey.
Source: The TIAA Institute. Questions have been edited for length.
The apparent decline in financial literacy comes as high inflation has made it more difficult for people to manage their finances.
“Employed adults with very low financial literacy were more than four times as likely to stop saving for retirement in 2022 because of inflation’s impact on their finances, compared to those with a very high level of financial literacy,” according to the TIAA-GFLEC report.
This poses a problem for students who aren’t learning about personal finance in school. “How is someone who’s a parent and who doesn’t have financial literacy going to teach their kids financial literacy?” Mendenhall asks.
States Strive To Add Financial Literacy Requirements in Schools
State legislators, educators and parents agree that some education in personal finance can give kids and their families the tools they need to survive and thrive in a complicated economy. And in fact, most states currently offer some kind of financial literacy program in schools.
Why not all 50 states? Because efforts to establish or beef up such programs have faltered as states face financial and jurisdictional headwinds.
As of 2023, 41 states, Puerto Rico and Washington, D.C., have legislation pending to establish, update or advance financial education, according to the National Conference of State Legislatures. Two states—Idaho and West Virginia—recently succeeded in establishing a financial literacy course requirement for high schools. The rule will take effect within the next couple of years.
But dozens of other financial literacy education bills have failed. Among the reasons are:
- Concerns about cost
- Disagreements over who should be determining the curriculum
- The failure of larger, often controversial bills that also touch on financial literacy
Recent Pushback in California, New Mexico
In New Mexico, Gov. Michelle Lujan Grisham vetoed a bill in April that would have allowed school districts to count a financial literacy course toward high school graduation requirements. But that bill also would have lowered the minimum credit requirements for graduation.
In California, the Senate Education Committee recently voted down a bill that would have mandated financial literacy instruction in grades K-12. Opponents argued that lawmakers should step back while a separate panel, the Instruction Quality Commission, oversees the effort. The commission updates the broader school curriculum every eight years. Its most recent update started in 2021 and is still ongoing.
“Unfortunately, with today’s volatile economy and lack of financial literacy education, young adults have worse outcomes, more debt, and fewer assets than ever before, and the problem is even more prevalent in black and brown communities,” wrote state Sen. Kelly Seyarto in a March 30 op-ed in which he pleaded for the education committee to reconsider his bill.
Parents Turn to Budgeting Apps, Online Resources To Train Kids
As states struggle to implement updated and uniform financial literacy training across schools, it’s up to parents to make sure their children learn how to make important decisions about money.
Mendenhall, a father of two who is launching a series of books on investing called Money Shackles, says his family practices budgeting on cash apps. Many of the top budgeting apps can help parents manage money better while turning the process into a family learning activity.
Other online resources can help too. The Consumer Financial Protection Bureau offers financial education for youth and adults. The Federal Deposit Insurance Corp. has financial guides for kids, organized by each grade.
More From Advisor
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
