Financial literacy is critical to managing money, but how well are countries preparing their students?
Tennessee tops the list of US states that offer their residents the best financial literacy, according to a new study report from the financial services company OneMain Financial. More than 99% of Tennessee public high school students have a “gold access” education and attend a school where they must take a personal finance course to graduate.
The OneMain Financial Report examines four things for each state: the number of active bills promoting some form of financial education in public schools, the status of business education in public colleges, the level of personal financial education offered and required, and the percentage of high school Students in Gold Access schools.
New York, Utah, Alabama and Virginia followed Tennessee in the rankings. Although only 2% of New York’s high school students attend Gold Access schools, 11 financial and economic education bills were proposed in the state this year. In the other three states, over 97% of students attend Gold Access schools. (Tennessee does have one though Poverty rate higher than at least 30 other countries.)
““We believe that understanding budgeting, saving, credit and credit cards, and credit scores can help people achieve lifelong financial well-being.””
“We believe that understanding budgeting, saving, borrowing and credit cards, and credit scores can help people achieve lifelong financial well-being,” OneMain Financial said in the report. “So we took a closer look at the latest laws and talks to assess how we as a nation are giving people access to financial literacy.”
Overall, elected officials had introduced 69 financial education-focused bills in 27 states by the end of October this year, according to Next Gen Personal Finance Financial Education Bill Tracker. NGPF is a non-profit organization aims to provide personal financial education to all students. Of these bills, 12 were signed into law in 10 states and 8 were pending in 3 states.
About two dozen states require students to learn about personal finance, either in a special course or integrated with other subjects, in order to complete high school. according to the Council for Economic Education‘s Survey of the States report. Some states, including Florida, passed legislation in the summer of 2022 making personal finance courses an individual requirement.
Alaska, Wyoming and the District of Columbia have no personal finance education requirements in K-12 schools and have not seen new bills, according to the Council for Economic Education report. California also does not have such requirements, but the state does passed legislation in July create a nationwide task force to deal with the problem.
(OneMain Financial declined to offer a rating of the lowest-performing states on personal finance education. However, the researchers said that 68% of American high school students don’t understand creditworthiness, and also found that auto loans ranked behind mortgages and Student debt accounts for the largest proportion of adult household debt.
Americans consistently perform poorly in surveys of financial literacy
US adults have correctly answered just 50% of personal finance questions in an annual financial literacy survey for the past six years The 2022 report by the nonprofit TIAA Institute and George Washington University’s Global Financial Literacy Excellence Center.
Financial literacy tends to be lowest among younger Americans, according to the TIAA Institute and GFLEC’s Personal Finance Index, a list of 28 key questions in the annual survey. On average, about 54% of Baby Boomers get all questions right, while 42% of Gen Z respondents get all questions right. The questions cover everything from saving, investing and borrowing to earning, consuming and understanding risk.
According to analysts at the Milken Institute, a nonprofit think tank based in Santa Monica, California, the level of financial literacy has “stubbornly resisted progress.” “This finding is of particular concern for young people, who are likely to face greater financial challenges than previous generations,” the researchers concluded in a 2021 report.
Money handling skills necessary
Over the past two years, the pandemic has prompted many states to consider mandating financial literacy education in schools. The pandemic has destroyed jobs and income for many households, especially low-income families. The push to promote financial literacy in schools appears to have borne fruit in Tennessee, with the state’s average credit rating rising 4 points to a “good” FICO FICO,
Score of 701 last year.
Americans continue to face an uncertain economic outlook. Although inflation had eased from 8.2% in September, it was still at 7.7% yoy in October, according to the latest government data. The rise in the cost of living finally showed some signs of slowing down after inflation hit a 40-year high of nearly 9% over a year ago this summer. However, high inflation has already left millions of households in dire straits.
US Federal Reserve Vice Chair Lael Brainard hinted earlier this month that the Fed may be slowing rate hikes. It has raised interest rates six times this year and in November raised the key interest rate for the fourth time by 0.75 percentage points. This pushed the short-term borrowing rate to a target range of 3.75% to 4%, making car loans and credit card debt more expensive.
Consumers also said they had to dip into their emergency savings to cover monthly bills. At the same time, US households have increasingly dependent on credit cards and personal loans. Total bank credit card balances hit a record $866 billion in Q3 2022, up 19% year over year, according to TransUnion TRU.