Financial literacy in the United States is in a distressing state, despite numerous studies on the topic, government agencies dedicated to it, and community organisations highlighting financial literacy issues. Many people in the United States are not familiar with even the rudiments of monetary topics; they do not understand how interest works, they do not know what kinds of financial benefits are available to them, they do not not know how to assess and interpret loan offers. This state of ignorance is extremely dangerous, as lack of understanding about finance makes people very vulnerable to exploitation.
There’s a reason financial literacy is low. For people with limited economic means, there’s no real incentive to get it. There may be an attitude that you don’t need education about money because you have no money, so what’s the point. You may live in a community where financial literacy isn’t promoted and is difficult to access. In some cases, information is deliberately kept from people in order to ensure that they remain in disadvantaged positions. Financial institutions that prey on lower class people rely on the face that they can keep them ignorant. This allows them to keep offering outrageous loan terms, to profit from payday loans and sleazy car loans and misleading mortgages.
Some US schools offer financial literacy education, sometimes at a very young age. Most of these schools are in middle class areas where money is around, and people think it’s important for children to learn about money and how it works. In lower class areas, fewer opportunities are available to primary school students who could benefit from early financial education. By the time those students hit high school, it may be too late, and teachers are struggling with other issues to boot. How can you focus on how interest works when your students are homeless, struggling to stay alive, dealing with dying family members? How can you provide financial literacy when some of your students are functionally illiterate?
Thus, people slip through the cracks. And not just poor people; many middle class college students find themselves in trouble with student loans and credit cards because they have a poor understanding of financial topics. This despite the fact that colleges and universities offer financial education to their students. Some even warn students at orientation about exploitative lending and practices to watch out for, but it goes in one ear and out othe other. Students tune out because they are excited or they think they already know this stuff, and suddenly they’re $7,000 in credit card debt with no functional way to escape.
Provision of financial literacy is very much hit and miss in the United States, and it really shouldn’t be. It should be both free, and widely available, which seems surprisingly difficult to accomplish with this and other education and outreach campaigns. Despite the fact that people clearly suffer as a result of not understanding how money works, efforts to address this problem are minimal, and catch as catch can. Government agencies that supposedly look out for consumers and have an interest in increasing participation in the financial market are falling down on the job.
Free financial literacy education is available, sometimes readily so in some communities. Not just in the schools, but also through community organisations, credit unions, local government agencies. It’s out there, these groups hold classes and seminars and have advice hotlines. There’s probably not enough free education to meet the needs of all citizens, but it’s definitely a step in the right direction. Yet, people aren’t accessing these services. For all the studies analysing why this happens, there seems to be a lack of progress on getting the issue addressed.
For starters, many people do not understand what financial literacy is, and don’t know why they would need education or what they could get out of it. This is especially common in the lower classes, where a conspiracy of ignorance prevails to keep people ill-informed, to make it hard for people to access information. Free classes are useless when people have no reason to attend them, and when outreach to provide reasons is not readily provided. Conversely, compelling people to attend classes as a form of gatekeeping to access social services primarily acts to keep enrollment in social services programs down, not to educate members of the public about financial topics.
Many of these classes are also poorly placed and timed. Poor public transportation can make it difficult to access a class in an area with spotty bus service, or a workshop in a facility that isn’t even on a public transportation route. Or the classes are at awkward times that make it difficult to attend. Many people who need financial literacy education are working or taking care of children. Scheduling classes for times when they’re likely to be doing those things means they can’t attend—and when people are working multiple jobs and caregiving and trying to manage a household, pretty much every waking hour may be taken up with those tasks. Bringing classes into the workplace could be a start to make them easier to access, but comes with its own problems. No one wants to be known as the person who needs to attend the remedial math class in the employee breakroom.
Provision of childcare or transit vouchers or other tools to make it possible to attend class could be a way of compensating for these issues, paired with steps to provide people with information about why they should consider financial literacy classes. With the knowledge they need to find useful free tools, and the support to allow them to use those tools, people might be more able to participate in financial literacy training, to empower themselves. And, in turn, to empower their communities, through the diffusion of information. All it takes is a handful of people who know about exploitative loans, for example, to change the culture in a community, to reduce exploitation, by helping their friends and neighbours.