Financial Education.
By Rebecca Patterson
Today is the last day of National Financial Literacy Month. We asked the Chairwoman of the Council for Economic Education, Rebecca Patterson, to assess the state of financial literacy in the United States. Some of the statistics are unnerving. The solutions for improving matters are straightforward.
There is a way to make America wealthier without a destabilizing global trade war: economic education.
With consumption responsible for two-thirds of U.S. GDP, it’s easy to see that the economy would be better off if a greater share of its population understood how to make good economic and personal finance decisions – how to save, spend and invest thoughtfully.
The opportunity is significant. Nearly 2 million American public-school students will graduate in the next four years without any requirements to learn basic economic or personal finance concepts. Many don’t have other ways to acquire those skills. As a result, we get results like those in a December Pew survey: only 20% of adult respondents said they were confident they could find their credit report, make a monthly budget, make a plan to pay down debt, save and create an investment plan. Confidence was notably lower among younger and lower-income respondents.
This lack of knowledge translates into behaviors and financial situations that work against a resilient U.S. economy. Even with a healthy job market, 59% of Americans didn’t have enough savings to cover a sudden $1,000 emergency expense, according to a January poll by Bankrate. The same survey found that 37% of American adults tapped their emergency savings in the past 12 months, while19% of respondents said they didn’t have any emergency savings.
Changing these statistics starts with education. Nearly nine in 10 adults agreed that financial concepts should be taught in high school, according to a recent American Bankers Association poll. Nearly three-fourths of the poll’s respondents said they would have been better off financially if they had learned these basics at an earlier age.
The Trump administration agrees. To kick of Financial Literacy Month on April 1, Treasury Secretary Scott Bessent said that “for too long, financial literacy has been treated as a luxury. It’s a necessity—just like reading and writing.”
The private sector is on board as well. In his annual shareholder letter last month, JPMorgan Chase CEO Jamie Dimon highlighted financial education as one of his top policy suggestions for a stronger economy. “Financial education should be taught as part of the K-12 education system. Everyone, and in particular our young people, should understand the basics: the need for a rainy day fund, how to look at savings, the value of a checking account (versus payday lending), the value of homeownership, the importance of saving for retirement and other basic principles.”
Research supports the idea that economic knowledge contributes to healthier financial lives. A study by the Center for Financial Security at the University of Wisconsin-Madison noted that the benefits of high school financial literacy continued for more than a decade after graduation – most notably in the form of higher savings and faster loan repayments. Indeed, the recent report, “Investing in Tomorrow: Lifetime Value of Financial Education in High School” found that students taking personal finance courses can save more than $100,000 over their lifetimes. These efforts are particularly helpful to minority students who often come from generations of economic inequality.
Higher financial literacy boosts wealth not just through saving but also through investing: it is positively associated with stock market participation, portfolio diversification, and portfolio returns.
Unfortunately, support from Washington, DC and the private sector isn’t enough to get the wheels turning to enjoy these outcomes. Ultimately, it is up to each state to set curriculum standards and high-school graduation requirements.
Recent years have seen progress. The number of states requiring at least one economics course in high school to graduate has risen by 3 in 2022 to 28 today. At least one personal finance course now appears in 35 states, up 12 over the same period.
Still, 11 states – including Alaska, Arkansas, Colorado, Delaware, Illinois, Maine, Massachusetts, South Dakota, Vermont, Washington, and Wyoming – don’t require a standalone course in either subject to graduate, according to a 2024 survey by the Council for Economic Education (CEE).
The US will have around 3.7 million high-school seniors graduating this spring, just from public schools, according to Department of Education data. Those states lacking requirements suggest that 12% of those graduates will be at higher risk of not being able to negotiate the most affordable college debt, understand the cost of carrying credit-card interest month to month, or appreciate the power of starting a retirement account early to help it compound over time. They may not understand the economic tradeoffs of policies being debated in Washington and what they mean for their lives.
Even where states have passed requirements, they are often unfunded. That means teachers, some of whom need this education themselves, are on their own to figure it out. The Federal Reserve and non-profits like CEE help to fill in these gaps by providing free lesson plans and training, but they have limited budgets.
Training teachers provides a return on investment that’s hard for the federal government to beat. The typical American public high school today has roughly 24 students per class. If a teacher leads two economics classes a semester, we can train around 4,000 teachers and easily reach the 2 million graduating high school students over the next four years.
Getting better terms overseas for US businesses and attracting more investment to America are reasonable paths to support growth, but at least as they are being approached now, they could come at potentially high costs. Policymakers who want a stronger economy and an extraordinary return on their investment should prioritize economic and financial education.