Financial Literacy options

By Katie Martens

Have you seen the Tik Toks by a gentleman who points out the deficiencies in American public schools? For example, he ponders why he spent so much time on algebra, and zero time learning how to do his taxes. This is a variation of a joke I’ve seen in a lot of places, and it essentially boils down to this: school is not the place you learn how to approach and cope with real life problems, like taxes, saving, minimizing debt, and many other financial literacy topics.

Let this article be your Financial Literacy 101 class, that you probably should have been enrolled in your freshman year of high school. This article will define “financial literacy,” discuss legislative action that has happened to encourage Americans to become more financially literate, and resources to continue your financial literacy education.

Definition of Financial Literacy

Financial literacy, or FinLit, focuses on the specific knowledge and concepts consumers need to manage their money and build wealth, depending on the individual’s situation. Some topics that are often featured in financial literacy include:

  1. How to create and manage a household budget

  2. Learning how to invest money for retirement

  3. Participating in one-on-one coaching and counseling to determine how to buy a house or start a business

  4. Even figuring out strategies to increase economic security for lower-income families.

I think it helps to flesh out this definition with a pop quiz-type example:

Sue and Bob are newly married, and recently learned they’re pregnant. Their one bedroom apartment isn’t big enough for three of them, so they decide that they need to buy a house. Bob heard from his bowling partner that you’re just throwing good money away by renting, so home-buying it is. What financial literacy topics come up in this scenario?

  • New life partners - marriage can have big impacts on your personal finance

  • New child - the addition of a new family member can significantly impact your finances.

  • Home ownership - this is a significant financial decision

Great, if those were the topics you listed in your head, we’re on the same page. Let’s take it a step further, and list out the skills Bob and Sue need to navigate these three topics:

  • Life partners - you may want to consult the marriage article in this Knowledge Base, but one of the top skills to combine households with your sweetheart is open communication. Financial literacy skills in this topic would also include paying bills promptly, working toward financial goals together, and tackling debt together.

  • New child - welcoming a new addition to the family can strain everyone’s emotional and mental and health bandwidth. Not as many realize the financial strain a child can bring to the family. Budgeting and investing are going to be critical skills for parents to brush up on because you don’t realize how expensive baby things get until you’re up at the 2 a.m. feeding, perusing Amazon for a 5th binkie that maybe will be the “one” to help your baby sleep longer than 2 hours at a time.

  • Home ownership - all of your financial skills are tested in this life experience. If you’ll need a bank loan to purchase your home, mortgage lenders will pick through all of your personal finance history to make sure you’ll pay back your loan in steady installments. You’ll want to have a good credit score , you’ll want to be able to show the potential lenders that you have the ability to manage debt well because you pay bills on time and you don’t spend more than you make.

Educational Requirements for Financial Literacy

Financial education is the process by which people gain information, skills, confidence, and motivation to act, including classroom education, one-on-one counseling and coaching, technology-based interventions, and self-study. In a 2018 study only ⅓ of adults could answer at least four of five financial literacy questions on fundamental concepts such as mortgages, interest rates, inflation, and risk.

States have recognized the growing complexity of financial products, and in 2021 alone, 38 states, Puerto Rico, and the District of Columbia, have introduced and passed financial literacy legislation. At the federal level, Congress created the Financial Literacy and Education Commission, which offers many different tools for financial literacy at mymoney.gov. Many of the state-level regulations require colleges to offer curriculum related to financial literacy. For example:

  • Arkansas requires the division of higher education to develop a module on the concepts of personal finance and macroeconomics

  • Illinois included a financial literacy course for students entering 9th grade

  • Nebraska adopted the Financial Literacy Act, providing a graduation requirement involved in financial literacy

To see if your state is involved in changing the educational requirements for financial literacy, check out this website.

Resources for Financial Literacy

I feel like an old millennial by admitting this, but much of my early education in the personal finance realm was through personal finance blogs. I’m not sure blogs are still the primary means of learning information related to financial literacy, but look at you here! You’re in the Knowledge Base, full of articles to help you with your financial literacy. Pat yourself on the back, because you’re already ahead of the curve and well on your way to ensuring your financial security. Here are some useful resources I have used or currently use:

  • You Need a Budget - one of many budgeting tools, the core principle of this service is that every dollar is assigned a job. You can use the service for 34 days before they charge you, and they offer many free online webinars to get a better feel for how to use their spreadsheets.

  • Acorns - invest spare change while you bank, helps those who have a hard time setting aside money for savings.

Digit - build “set it and forget it” savings. Every time money comes in, the app divides it into bills, savings, an investing account, and a spending account