Why financial literacy education in the US sucks

if you've clicked on this video you're probably familiar with this kind of sentiment why aren't we taught financial literacy in school imagine if School taught us compound interest over mitochondria being credit card debt isn't taught in high school to some extent research supports this according to a 2019 study by the National Bureau of economic research over half of us adults are considered financially illiterate and that lack of literacy is one driving force behind the financial instability a lot of Americans face we're over a trillion dollars in credit card debt over a quarter of us don't

have any retirement savings and over a third of us would struggle to cover a $400 emergency expense so perhaps it's no surprise that 88% of adults agree that high schools should require financial literacy courses but for many of us it's not quite true that we were never taught anything so maybe the question isn't why didn't we learn this stuff but rather why don't we remember any of it and how do we change [Music] that there's actually a pretty straightforward way to determine if you're financially literate a simple set of questions known as The Big Three

one about interest rates one about inflation and one about risk diversification let's pause here to see how you [Music] do if you chose these answers congrats you're financially literate and if you didn't someone who is financially illiterate doesn't know what to do with their money where their money is going where their money currently lives and doesn't even know the options getting these answers right requires both a knowledge of financial vocabulary and the ability to make mental calculations it takes time to understand this stuff you can't just like learn the basics in one or two days

and then call it good in other words financial literacy is a lot like well literacy literacy you can't just sit through one class on the alphabet and then expect to be able to pick up war in peace and you can't sit through one lesson on money management and expect to know exactly how to handle your own finances the problem is that's exactly how a lot of us were taught about these Concepts since 1998 the independent Council for economic education has been tracking legislative requirements at the state level for high school Financial classes and their data

shows that back then at least 21 states offered some form of financial education and by 2011 nearly every state did it's hard to tell how many of us actually took those classes given that a lot of them weren't mandatory but somewhere between learning about the Bost and tea party for the 10th time and that one day spent on World War I your history teacher might have taken a crack at teaching you about credit card debt but in the not so distant past us schools actually taught Financial education pretty differently we'll hear more about that after

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one of over 6,000 metro stores nationwide now back to the video we don't have great records of education standards from before the'80s when the Department of Education was formed but based on Old teaching materials it seems that up until the 50s or 60s money management was a fixture in the public school curriculum often as part of home economics class alongside you know sewing and baking students were learning how to budget for Better Living use consumer credit and save their weddings there were also Standalone consumer education classes which seemed to be less gendered but that started

to shift thanks to the Space Race worried that American students weren't measuring up to students in the USSR in 1958 President Eisenhower signed the National Defense Education Act which which placed an importance on math science and foreign languages and years later the US Department of Education published a landmark report that partially blamed the country's Decline and educational performance on schools spending their time training their students for adulthood that same document doubled down on Eisenhower's math and science-based educational goals proposing new basics for Nationwide curriculums since then a steady March of legislation has made curriculums more

and more focused on standardized testing leaving even less room for life skills like Financial education but thankfully for at least the past decade the pendulum appears to be swinging back more and more students are receiving the kind of financial education that might stick spending full semesters learning about things like household budgeting taxes credit management and student loans in 2022 nine states required a standalone class to graduate another 14 required that students receive personal finance lessons within a different course and five more States offered it as an elective so access has definitely ramped up dramatically and

as of February 2024 at least seven more states have active bills that would introduce mandatory classes and there's good reason to be optimistic that more States will follow suit many of these bills even have rare bipartisan sponsorship likely because Financial education really works it's been shown to improve credit scores lower delinquency rates reduce risky payday lending and Lead students to low interest College financing it even has a sort of trickle up effect on the students families and even the class's teachers researchers are also in the early phases of learning more about what kinds of lessons

work best and which don't really stick like any planning for retirement maybe because that's just a bit too far off for high schoolers so it might only be a matter of time before Americans remember as much about compound interest as they do about cellular energy production and as much about inflation as the dimensions of [Music] triangles