Why Financial Literacy Is So Elusive
Much of the knowledge vanishes quickly in the absence of constant use.
Bloomberg, April 30, 2019
Graduation season will soon be upon us, and with it, so many admonitions explaining why students are unprepared for the challenges of the real world. Graduation speeches will discuss the trillions in student-loan debt, why spendthrifts need to stop buying lattes and why we all need to save more money for retirement. Someone will mention the miracle of compound interest, misattributing the quoteto Albert Einstein, along with terrible advice about “following your passion” and lots of other well-intentioned but equally worthless platitudes.
But the one that always grabs me is the lament about a lack of financial literacy. We looked at this a few years ago after the Financial Industry Regulatory Authority’s National Financial Capability Study found only a little more than a third of respondents in a survey were considered highly financially literate. This lack of basic understanding about money among a majority of Americans has been a consistent finding over the years. Look no further than the subprime–mortgage debacle and loans with teaser rates as an example of how awful things can get when consumers don’t understand the financial products they buy.
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I originally published this at Bloomberg, April 30, 2019. All of my Bloomberg columns can be found here and here.
