Comment: Americans need tutoring on financial literacy

Adults and students could improve their economic health with more training in financial basics.

By Steven Hill / For The Fulcrum

As this year’s presidential election gathers steam, there’s going to be a lot of emphasis on getting young people to vote. Since 2020, about 16 million young people have come of voting age, so you can bet that the presidential candidates will make their pitches to motivate these young Americans. And organizations like Rock the Vote will try to engage young voters as well.

But, as Americans, we are more than voters. We are also economic agents who must work and manage our economic lives. That can be a challenge for many young people to learn, and unfortunately few political leaders encourage young Americans to learn about economics or become financially literate.

Yet so many political decisions have an economic component. Economically informed citizens are better equipped to make good decisions, both in their personal lives and when voting or participating in civic life. When citizens understand the consequences of their financial choices, they can make more informed decisions at the ballot box.

I have sometimes wished that when I was younger I had been taught greater financial literacy. In particular, I would have benefited from lessons like, “If you purchase a house as soon as possible, you won’t waste years of your money paying rent, but instead you will save up equity for later use.”

And “If you put your money in the stock market and leave it there for five to 10 years, you’re almost guaranteed to make money, given the historical record.” Or how about: “For every year you wait before you take your Social Security, you will increase your monthly benefit by about 8 percent, which amounts to 70 percent more if you wait until you’re 70 compared to if you start taking Social Security early at 62.”

The first two I did not learn until much later in life; when it comes to the third one, I’m always amazed at the number of friends and associates who are approaching retirement years and don’t know that waiting to start your Social Security payments is a good thing to do, if you can afford it.

What I have learned is that being financially literate at any age gives an individual the resources they need for greater security. And the sooner you know, the better it will go. Conversely, without financial literacy you can get yourself into a heck of a lot of trouble, including debt, bad credit, or even housing foreclosure and bankruptcy.

In 2022, 270,000 homeowners, or about 8 percent of mortgage-financed home buyers, were underwater on their mortgages, meaning they owed more on their property than it’s worth. In 2009, during the nationwide economic collapse sparked by a home mortgage crisis, nearly a quarter of the nation’s homes were underwater.

The film “The Big Short” showed how banks were handing out loans like candy, including memorable cases of mortgage lenders providing “NINJA loans” (“no income, no job, no assets”) to applicants, including an exotic dancer who owned five houses and a condo with adjustable rate mortgage loans on each.

When should you take on a huge financial commitment like buying a house? What are the pros and cons of investing in other commodities, whether the stock market, gold or the latest financial fad, bitcoin? The media trumpets stories about fortunes being made and a person can feel like they are missing the gold rush. And then later the media downplays the tragedies of those who made the wrong investments and lost everything.

Consequently, many young people never learn the basic financial skills needed to prosper in life, and in some ways it is understandable. Compared to making a bitcoin fortune or becoming a TikTok influencer, learning about economic and financial basics when you are 17, 18, 20 years old seems boring.

Fortunately more people are realizing the importance of education around financial literacy, especially for young people. Increasingly it’s recognized that economic education can equip young adults with essential knowledge about how the economy functions, including concepts like supply and demand, inflation, wages and fiscal policy.

Currently 35 states require high school students to take a course in personal finance to graduate, and 28 states require students to take a course in economics. The only states that have no requirement include Colorado, Delaware, Illinois, Maine, Massachusetts, Oklahoma, South Dakota, Vermont and Washington state, where legislation was proposed this year but failed in the final days of the session.

Arizona enacted legislation to establish a State Seal of Personal Finance Proficiency to recognize public school graduates who have attained a high level of proficiency in personal finance.

Organizations like the Council for Economic Education have been advocating for public policy that instills in high school students the fourth “R,” a real world understanding of economics and personal finance. Its FinEd50 initiative advances policy changes at the state level and reports a 12-state increase since 2022 in states passing personal finance requirements. That translates into an additional 10 million high school students who will be able to learn financial literacy.

Full participation in our representative democracy requires a measure of understanding of our economic lives. I wished I had learned that many years ago. Fortunately more young people are now gaining knowledge of that very practical information. The United States is better off when more of its residents have high levels of financial literacy.

Steven Hill was policy director for the Center for Humane Technology, co-founder of FairVote and political reform director at New America. The Fulcrum is a nonprofit, nonpartisan news platform covering efforts to fix our governing systems. ©2024 The Fulcrum, thefulcrum.us. Distributed by Tribune Content Agency, LLC.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Opinion

toon
Editorial cartoons for Monday, Feb. 10

A sketchy look at the news of the day.… Continue reading

bar graph, pie chart and diagrams isolated on white, 3d illustration
Editorial: Don’t let state’s budget numbers intimidate you

With budget discussions starting soon, a new website explains the basics of state’s budget crisis.

Comment: Trump can go only as far as the courts will allow

Most of Trump’s executive orders are likely to face court challenges, setting the limits of presidential power.

Comment: Civil service needs reform; Trump means only to gut it

It’s too difficult to hire and fire federal workers. A grand bargain is possible, but that’s not what Trump seeks.

Saunders: U.S. Iron Dome isn’t feasible now, but it could be

Trump is correct to order a plan for a system that would protect the nation from missile strikes.

Harrop: Trump has no sense of damage from tariff threats

Even if ultimately averted, a trade war with Canada and Mexico could drive both from U.S. exports.

Curtains act as doors for a handful of classrooms at Glenwood Elementary on Monday, Sept. 9, 2024 in Lake Stevens, Washington. (Olivia Vanni / The Herald)
Editorial: Schools’ building needs point to election reform

Construction funding requests in Arlington and Lake Stevens show need for a change to bond elections.

FILE- In this Nov. 14, 2017, file photo Jaìme Ceja operates a forklift while loading boxes of Red Delicious apples on to a trailer during his shift in an orchard in Tieton, Wash. Cherry and apple growers in Washington state are worried their exports to China will be hurt by a trade war that escalated on Monday when that country raised import duties on a $3 billion list of products. (Shawn Gust/Yakima Herald-Republic via AP, File)
Editorial: Trade war would harm state’s consumers, jobs

Trump’s threat of tariffs to win non-trade concessions complicates talks, says a state trade advocate.

A press operator grabs a Herald newspaper to check over as the papers roll off the press in March 2022 in Everett. (Olivia Vanni / The Herald file photo)
Editorial: Push back news desert with journalism support

A bill in the state Senate would tax big tech to support a hiring fund for local news outlets.

A young man carries water past the destroyed buildings of a neighborhood in the Gaza Strip, Feb. 2, 2025. President Donald Trump’s proposal to “own” the Gaza Strip and transfer its population elsewhere has stirred condemnation and sarcasm, but it addresses a real and serious challenge: the future of Gaza as a secure, peaceful, even prosperous place. (Saher Alghorra/The New York Times)
Comment: ‘Homeland’ means exactly that to Gazans

Palestinians have long resisted resettlement. Trump’s plan to ‘clean out’ Gaza changes nothing.

toon
Editorial cartoons for Sunday, Feb. 9

A sketchy look at the news of the day.… Continue reading

Rent stabilization can keep more from losing homes

Thank you to The Herald Editorial Board for its editorial, regarding rent… Continue reading

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.