Financial Literacy Receives Much Needed National Attention

As the country recovers from the worst economic recession since the Great Depression, many in academia and government are questioning how financial institutions and individuals partook in such risky and costly behavior, and how it can be averted in the future.  While there is certainly no single cause, many have attributed a great deal of the problems associated with this recession to a widespread lack of financial literacy.

One study showed that only 27 percent of college graduates are adept to handle their own financing.  A different study released late last year by the Financial Industry Regulatory Authority (FINRA), called “Financial Capability in the United States”, further highlighted the state of financial literacy in this country.  In that study less than half of the respondents, 46 percent, were able to correctly answer a question about inflation and interest rates.  In one particular question about inflation, less then half, 43 percent, of 18-29 year old respondents answered correctly, while 70 percent of those 30 years old and older answered correctly.

In order to address this growing problem, government agencies have partnered with schools across the nation to educate students.  The Departments of Energy and Treasury have created a joint initiative called the National Financial Capability Challenge in which schools participate in an annual exam and winners receive national recognition and prizes.  The Obama administration has also established the Office of Financial Education within the newly created Council on Financial Capability in an attempt to assist in financial matters and to protect consumers.  However, there are concerns over the extent to which the office will be able to carry out its mandate and how it will reach out to those in financial need.

The FINRA study concluded that while the state of financial literacy on the national level is worrying, there are signs of improvement and hopes of creating a “financially capable population [which] can result in a larger and more efficient market for financial products, greater participation in asset building and greater financial stability.”

Posted by: Michael Darden

Sources: Department of Treasury, FINRA, CBS Money Watch, New York Times

Photo credit: “Personal Finance” courtesy of flick user ›SwEeTy‹ ..photographer

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