April is Financial Literacy Month. As a former college admissions officer and financial professional, it’s especially ironic that financial literacy is this month’s theme. Because, just like families file their income tax returns, anyone with a student who wants to go to college has to decide which college they can afford to pay for. Financial literacy is important for both. Among high school students themselves, only 18% are required to take at least one of her semester courses in personal finance (Source: 2019-2020 Financial Education Report) [Next Gen Personal Finance, 2020]).
The recent financial market turmoil following the collapse of the Silicon Valley Bank has left the public uneasy, and financial services industry leaders are working to promote the financial literacy needed to evaluate investments and financial information. , should be reminded that they have a responsibility to do more. As financial markets become more complex, the ability to accurately interpret information is more important than ever. Given the enormous financial and intellectual capital that exists in wealth management and education, it’s time to identify more creative partnerships between the two industries to promote financial literacy.
Financial literacy is very important in the United States. This is because individuals have a great responsibility to ensure their own financial security. A recent survey has come to the disturbing conclusion that despite continued efforts by the US government, nonprofits, and commercial organizations, Americans still have low levels of financial literacy. For example, according to the 2020 Personal Finance Index study produced by the TIAA Institute and the Center for Global Financial Literacy Excellence, only about 20% of U.S. adults exhibit relatively high levels of financial literacy, with most answering only half of the questions. I did not answer (Source: TIAA Institute-GFLEC, 2020-P-Fin-Index, April 2020).
Reforms focused on financial literacy were enacted more than a decade ago when the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated financial education for the Consumer Financial Protection Board (CFPB) as part of its mandate. It’s time to Recent studies point to the need for further progress. In its 2022 annual report, the CFBP found that many people are still unprepared to engage in sound financial decision-making, with levels of financial literacy falling across demographic groups, according to a study by the Milken Institute. Vastly different (source: Financial Literacy in the United States, Oscar) Contreras and Joseph Bendix, 2021, Milken Institute). As our population becomes more diverse, wealth inequality will only widen if recent trends continue. Failing agreements and national standards on how to teach these important skills, people end up educating themselves.
Access to financial education is greater than it was in the 1970s when I first started working with high school students as a college admissions counselor, but a significant gap remains. For example, in California, about 50% of the high school population is low-income, underserved students. According to Eloy Ortiz Oakley, former president of the California Community College System and now president and CEO of College Futures, a foundation focused on educational equity and socioeconomic progress in California, it’s a financial challenge. Not just a lack, but a lack of financial literacy. , creates barriers to student success.
It’s a perception problem that’s been going on for over 50 years. Even when financial assistance is available, families assume they do not qualify, do not know how to access it, or both. It’s a product of the general confusion surrounding the money system and how it works. Common. However, even among wealthy families familiar with these services, inheritance concerns and lack of financial knowledge persist.
In a 2013 report, the CFBP noted that the financial industry spends $17 billion on marketing consumer products and services. This disparity in spending in consumer marketing and education shows how our priorities are irrelevant and need to change.
Here are some thoughts on where to start.
• Within companies that provide financial products and services to investors, not only is educational information provided to customers, but feedback is sought on the effectiveness of tools ranging from shareholder reports to websites to digital tools. We will double our efforts to make FinTech is of particular interest given not only its technological capabilities, but also the extent to which consumers increasingly rely on technology for information. This is a test.
• Financial institutions should increase their outreach to schools and community organizations to support financial education. In my experience, these programs increase the interest of students pursuing careers in financial services and create a pipeline of future talent that is desperately needed in the industry.
• At the policy level, states should pass legislation requiring high school students to complete at least one semester of financial education courses. As of November 2022, 17 states are doing so.
Not only does financial literacy impact current and future customers and investors, but reducing wealth inequality in this country is a shared responsibility that requires improved access to financial education. Finance and education leaders must show concern for this issue. sound financial decisions. As the clock ticks, it is vital to remember that this threat to our nation’s success does not wait another 50 years.
published author, Linda Davis Taylor She is an expert in financial literacy, wealth and education focused on advocating for women’s financial independence and strength. Linda is an Independent Trustee of Morningstar Funds Trust and in Los Angeles she is a Director of San Pasqual Fiduciary Trust Company.