Benefits of Financial Literacy

Over 50% of Americans have credit cards, and the latest stats show that credit card debt stands at $7,050 per average household, with an average interest rate of 17% (Jez Davidson, 2016). Many people in this nation lack proper financial education, which negatively impacts unemployment rates, poverty, and GDP. Financial education is an essential skill that must be taught, as it cannot be learned otherwise. It is a necessary tool for financial independence and is used in everyday life. Therefore, a financial education class should be required in every high school to prepare students for a financially stable future.

A structured financial education curriculum would enable students to become more self-sufficient by equipping them with the skills needed to make informed decisions about their income and understand the consequences of financial mismanagement.

Disposable income, or the amount of income available after taxes for saving or spending, is a critical concept that students must grasp (Chapel Hill, 2017). Financial education classes were initially introduced to support a declining GDP in the United States. These classes were also intended to help lower the unemployment rate and reduce poverty, as financial missteps often lead to bankruptcy or impoverishment.

Financial education classes teach essential skills such as how to pay taxes, manage mortgages, allocate savings, and balance disposable income with savings and consumption (Field, Bill 2017). Despite being offered in colleges, high schools, and online, financial education remains an optional elective, resulting in limited class sizes. The Organization for Economic Co-operation and Development (OECD) created the first financial education program in 2003, launching it in 2008 to provide research and economic data to the public (Omar Baig, 2018). This initiative highlights the importance of financial education as a vital skill that should be universally accessible.

According to the National Center for Education Statistics, in 2015, 69% of high school seniors enrolled in college the following year (Genevieve Lord, 2018). This statistic suggests that many people are aiming for higher-income jobs, which necessitate financial skills. Understanding financial management is crucial for managing personal finances and achieving long-term economic stability. Many people underestimate the effect of financial education classes on the American economy. If financial education were a requirement in the American education system, it could significantly benefit the economy by fostering a financially literate populace.

Paul Carbert, a policy advisor at the North East Chamber of Commerce, provides an insightful perspective on how teaching financial education can lead to more job opportunities. He suggests that understanding financial principles can open doors to careers in the financial services industry (Davison, Jez, 2016). Jobs in accounting, financial education, and financial analysis contribute to economic growth by boosting GDP as money circulates more efficiently through the economy. Financial education enhances economic growth by increasing consumption levels, fostering better saving and spending habits, and ultimately boosting GDP.

As high school students transition to adulthood, the number of financial decisions they face continues to grow. Mismanagement of student loans adds to the national debt, but financial education can empower students to handle such challenges, thereby alleviating the national debt burden (Lord Genevieve, 2017). Reducing student anxiety and equipping them with financial management skills benefits both individuals and the nation.

Critics argue that financial education classes are unnecessary, yet evidence suggests a strong correlation between such education and improved financial outcomes. A survey of 2,500 college students found that 91% would feel more confident about their finances with school-based financial planning education (Harrington, Cindy, 2018). This demonstrates the value of financial education in boosting financial confidence and capability.

Annamaria Lusardi, a financial education expert, highlights the lack of financial literacy among the population, citing a $1.3 trillion student loan debt and widespread misunderstanding of interest compounding (Carlson, Karen, 2017). A financial literacy quiz revealed that only 17.4% of participants achieved excellent scores, underscoring the need for improved financial education.

Rocky Lalvani of Richer Soul points out the discrepancy between high earnings and financial struggles, emphasizing the need for better money management education (Field Bill 2017). This evidence shows that many people are misinformed about their financial literacy and could benefit from structured education.

Research supports the positive impact of financial education on credit scores and debt management. A study comparing states with mandated personal finance education to those without found improved credit scores and reduced default rates among students receiving financial education (Brown, Collins, Schmeiser, and Urban, 2014). This correlation underscores the practical benefits of financial education in real-world scenarios.

Furthermore, financial education classes could address the reluctance of parents to discuss money matters with their children. A T. Rowe Price Survey in 2017 revealed that 69% of parents were hesitant to talk about money with their children (T. Rowe Price, 2017). Financial education in schools can fill this gap, teaching students to manage debt, credit cards, savings accounts, and consumption effectively.

In conclusion, financial education is a critical component of a well-rounded education. It prepares students for the financial realities of adulthood, enhances their ability to contribute positively to the economy, and equips them with the knowledge to make informed financial decisions. By making financial education mandatory in high schools, we can foster a financially literate generation capable of navigating the complexities of the modern economy. This initiative would not only benefit individuals but also strengthen the overall economic fabric of the nation.

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