Tackling America’s financial literacy crisis starts at home

We’ve known for some time that many Americans struggle to understand finances. Unfortunately, this is a problem that seems to be getting worse in our country. I was surprised to learn that only 34% of Americans can answer at least four of the five basic financial literacy questions on topics such as mortgages, interest rates, inflation, and risk according to FINRA.

Despite noble efforts at the federal, state and local levels, a portion of the population remains financially illiterate – meaning they lack the ability understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Without these skills, Americans struggle to accomplish everyday tasks, like paying their bills on time, as well as larger goals, like planning for retirement or buying a home.

We are going to have to come together as a country to meet this challenge. However, as individuals and parents, it is easy to start with our own children. Here are three thoughts on how you can help the next generation bridge the financial literacy gap:

Step 1: Talk to your kids about money

Education starts at home and it’s never too early to discuss money with your children.

According to a study by the Boeing Employees Credit Union, only 28% of parents currently talk to their children about money. This is often based on fear, embarrassment or the belief that money is a taboo topic of conversation, which we need to overcome as a society.

Your children will benefit from learning about the financial decisions that have worked for you as well as the missteps you may have taken along the way. By helping them understand your spending habits, how you manage the family budget, and think about debt, they’ll feel more comfortable asking questions. It also helps them start building a roadmap for when the time comes to manage their own finances.

Step 2: Create a home project

Hands-on experience is a great way to improve financial literacy. Setting up a learning project at home is a great way to get your kids thinking about financial responsibility.

One way to do this is to challenge them to set a monthly budget for their pocket money and help them open a savings account where they can set aside a small portion of their money. This can provide fundamental insight into smart money practices. The more your children learn to save, the better they will understand how rewarding it can be to see their money grow. And using their savings for an expensive item they never thought they could afford on their own can be a tangible reward for them.

Financial literacy has been a passion of mine for a long time and I have tried to teach these concepts to my own children. Starting small with general saving and budgeting habits can lead to financial responsibility, stability, mobility, and financial well-being.

Step 3: Prioritize formal education

The good news is that formal education in financial literacy has already started to gain traction, albeit to a limited extent. The Council for Economic Education found that the number of states requiring high school students to take a personal finance course rose 24% from 2018 to 2020. Additionally, just in October, Ohio became the most great at requiring a financial literacy test for high school students. .

The federal government is also getting involved. The Program to Inspire Growth and Ensure Budget Advice and Knowledge for Young People (PIRGY BANK) Act is a bipartisan bill recently introduced in the Senate that would create a pilot savings program for high school students to promote financial literacy through hands-on and experiential learning. This program would boost overall financial literacy and create an opportunity for students to learn how to build stability for long-term financial success.

These programs are essential because there is a direct correlation between them and a solid understanding of the financial skills young Americans need to make good decisions about their money. For example, young adults who took state-mandated personal finance courses in high school are less likely to make critical financial mistakes, such as borrowing from payday loan companies, which charge high interest rates, than those who were not obliged to take such courses. , according to FINRA.

You can start now by talking to your kids about money and creating a home project. Consider enrolling your child in a local financial literacy program or encourage your child’s school to set one up. And don’t forget to contact your representatives in Washington, DC, to let them know that you support pending legislation like the PIGGY BANK Act. We owe it to our children and future generations to step up and foster greater financial literacy so they can achieve financial security and live richer lives.

AAN-0478AO

Nationwide Annuity Distribution Manager, Nationwide

Craig Hawley is a seasoned executive with over 20 years of experience in the financial services industry. As Nationwide’s Head of Annuity Distribution, Mr. Hawley helped build the company into a recognized innovator of financial products and services for RIAs, the paid advisors and the clients they serve. Previously, Mr. Hawley served more than a decade as general counsel and secretary at Jefferson National. Mr. Hawley holds a JD and a BS in Business Administration from the University of Louisville.

Louis R. Hancock