“When are we ever going to use this?”
Most students are familiar with this phrase. Whether it’s the methods of integration unit in Calc or the Shakespeare unit in English, we’ve all said it at some point in our academic careers. I’m not going to discredit the importance of learning integration by parts or understanding the significance of Othello; however, I also believe that while the American school system covers a broad range of unique and interesting subjects, it fails to teach us a fundamental subject that everyone should learn.
The lack of this one subject in our educational system can be traced to many socioeconomic symptoms plaguing the nation today. As of 2020, student loan debt has hit a record of $1.6 trillion (Friedman), nearly 8% of America’s GDP. The wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016 (Schaeffer). Millennials, the newest generation to enter the workforce, have the lowest credit scores of any preceding generation (Stolba). All these growing symptoms are pointing to an unsuspecting cause: American’s are becoming less and less financially literate, and the current school system is not helping.
Financial literacy is the ability to understand and properly apply financial management skills. This means being able to properly manage your money and being fiscally responsible with your assets and liabilities. In an age where increasingly complex financial products are becoming available to a growing range of the population, financial literacy has never been more important. However, a three-year study from the FINRA Foundation showed a “clear trend of declining financial literacy.” Between 2009 and 2018, the percentage of people who could correctly answer most questions about interest rates, inflation, board prices, financial risk, and mortgage rates dropped from 42% to 34% (Keshner). The divide in financial capability was especially prevalent between younger Americans, low-income earners, and African Americans and their older, high-earning counterparts. All in all, the age and racial wealth gap are becoming wider and wider, and lack of financial literacy is a major culprit to blame.
The solution to this growing problem is fairly elegant: increase the emphasis on financial literacy in our nation’s educational system. As simple as this solution may be, the country has yet to take heed. The American Federation of Teachers reports that 25 states had less funding for K-12 schools in 2016 than they did before the Great Recession (Weingarten). In addition, most states do not require financial literacy classes for high school graduation. Only five states — Alabama, Missouri, Tennessee, Utah, and Virginia — require high school students to take at least a half-year personal finance course as a graduation requirement. This means that most American students aren’t learning about important topics like using credit responsibly, investing in assets, saving for retirement, and navigating important financial decisions such as taking out student loans or mortgaging a home.
Whether or not the public or government seems to care about this issue, the lack of financial literacy education in our schooling system will continue to wreak socioeconomic havoc on our society. The issues of economic inequality (in age, gender, race, etc.) are exacerbated as financial literacy rates continue to fall across the nation. As I came to learn more about this issue last year, I sought to do my part in working towards the solution.
My nonprofit organization, Mezo Inc., is working to provide education to students in economics, finance, and business. My hope is that more students recognize the importance of financial literacy through our programs. While we have our work cut out for us, one thing is for certain. We’ll be able to answer the question of “when are we ever going to use this?”
BY: Ryan Wang - Financial Correspondent
Works Cited
Friedman, Zack. “Student Loan Debt Statistics In 2020: A Record $1.6 Trillion.” Forbes, Forbes Magazine, 5 Feb. 2020, www.forbes.com/sites/zackfriedman/2020/02/03/student-loan-debt-statistics/#3db82ac9281f.
Keshner, Andrew. “Financial Literacy Skills Have Taken a Nose Dive since the Great Recession.” MarketWatch, MarketWatch, 27 June 2019, www.marketwatch.com/story/americans-financial-literacy-skills-have-plummeted-since-the-great-recession-2019-06-26#:~:text=The%20study%20found%3A&text=People%20ages%2018%2D%20to%2034,from%2030%25%20to%2017%25.&text=49%25%20of%20people%20who%20had,spent%20less%20than%20they%20made.
Schaeffer, Katherine. “6 Facts about Economic Inequality in the U.S.” Pew Research Center, Pew Research Center, 31 May 2020, www.pewresearch.org/fact-tank/2020/02/07/6-facts-about-economic-inequality-in-the-u-s/.
Stolba, Stefan Lembo. “Millennials and Credit: The Struggle Is Real.” Experian, Experian PLC, 4 Apr. 2019, www.experian.com/blogs/ask-experian/taking-a-look-at-millennial-credit-scores/?pc=sem_exp_adnet&cc=sem_exp_adnet_ad_b196976374437635020035029066409404630760.
Weingarten, Randi. “A Decade of Neglect: Public Education Funding in the Aftermath of the Great Recession.” American Federation of Teachers, AFT - A Union of Professionals, www.aft.org/sites/default/files/decade-of-neglect-2018.pdf.
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