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 the powerhouse. 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 U.S. 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 school 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 that? There's actually a pretty straightforward way to determine if you're financially illiterate. 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 do. If you chose these answers, congrats, you're financially illiterate. And if you didn't… Someone who is financially illiterate doesn't know what to do with their money, where their money's 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 and Peace. 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 Boston 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, U.S. schools actually taught financial education pretty differently. We'll hear more about that after a word from this video's sponsor. This episode is presented by Metro by T-Mobile. This tax season, Metro wants to help customers avoid wasting dollars by using their tax refunds to catch up on things that they want, not on things they don't. According to Metro, you don't take yadda yadda in life, so don't take yadda yadda from your wireless provider. Metro by T-Mobile has no contracts, no credit checks, and no surprises. Metro does not influence the editorial process of our videos, but they do help make videos like this possible. To learn more, you can stop by 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 for 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 placed an importance on math, science, and foreign languages. And years later, the U.S. Department of Education published a landmark report that partially blamed the country's decline in 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 triangles.