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Should You Be Required To Take A Financial Literacy Course?

Two experts lay out the pros and cons

The United States recently ranked 14th in a global study of financial literacy. Our financial literacy rate was a failing 57 percent. If that’s not bad enough, studies show that even though most of us are actually very financially illiterate, we’re still confident in our ability to handle money. Research shows that this undeserved self-confidence is putting millions at financial risk.


A recent study included a quiz of six questions on fundamental financial issues: interest on bonds, mutual funds, compound interest, et cetera. The average person only got half of the answers correct, and 37 percent of people got 4 out of 6 correct. Comparatively, the number of people who got four correct answers in 2012 was 39 percent; and in 2009, 42 percent of people successfully answered four questions. That means, since The Great Recession, our financial literacy has gotten worse, despite our confidence going up. Seventy-six percent of respondents gave themselves a “very high” rating on financial knowledge in 2015, as compared to 67 percent in 2009.

Our overconfidence is leading to some unfortunate financial consequences: Large numbers of people are running up late fees and interest payments on credit cards, overdrawing bank accounts, and borrowing money from costly nonbank sources (in addition to other less-than-ideal behaviors). One of the possible solutions to our underwhelming money management is that financial literacy courses become a requirement for college students.

The Wall Street Journal recently ran an online debate between two financial experts on whether or not college students should be required to take a personal finance course. Dr. Annamaria Lusardi is the Denit Trust chair of economics and accountancy at the George Washington University School of Business; she argued that these courses become a requirement. The rate of students defaulting on their student loan debt is staggering, and half of millennials take on student loan debt without first calculating their monthly payments. Further, the need to maintain retirement funds and investments is population wide and requires an in-depth understanding of interest compounding, risk diversification, and inflation. Dr. Lusardi points to a study conducted by the FINRA (Financial Industry Regulatory Authority) Investor Education Foundation, which found that personal finance courses with a rigorous curriculum and trained teachers are positively influencing young people’s financial behaviors.

Lauren Willis, a professor of law at Loyola Law School, believes that financial literacy courses miss the real issues at hand. She argues that these courses teach about the availability of products, but not the context or skills necessary to evaluate the products, as was found in a recent study by The World Bank. Willis argues that even experts disagree on the right strategies; plus, she says, financial offerings change too quickly for educators to keep up. She also believes a personal finance course would send the message that financial success is a personal decision—when really, government policies have a more significant effect on financial health than one’s savvy. She also warns that financial literacy courses will contribute to the damaging overconfidence Americans are already prone to in their financial decisions.

One issue that did not come up in Lusardi and Willis’ debate is that only about 33 percent of American adults have a college degree. There is already a huge financial literacy disadvantage for those who do not attend college: 65 percent of Americans with graduate degrees possess basic financial skills, compared to 19 percent of high school graduates. Those who attend college are sometimes more affluent than those who don’t, and by offering college students (and not those who cannot afford or choose not to go to college) financial literacy courses, we are further exacerbating a wealth gap. Hopefully, we can all agree that any goal toward improving our nation’s financial literacy does not exclude those who may need it the most.

The solution is not immediately clear, but the need is without question. Two of the largest generations, baby boomers and millennials, are reaching ages rife with financial decisions. Baby boomers are nearing—if not already in—retirement. Millennials are paying off student debt, buying homes, and starting families. Many don’t realize that they need to start saving for retirement now. Given the poor nationwide understanding of personal finance, it begs the question of whether either group is prepared for its next step. It would be easy to cast this problem off on individuals—what they don’t know will only hurt them—but research suggests that poor financial literacy affects our entire economy for the worse. Whether or not it’s a required college course, we would all be better off with some financial schooling.

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