Do colleges teach financial literacy?
But, there are colleges and universities around the country that have implemented robust financial literacy programs and coursework so that their students know how to balance a budget, apply for a credit card, or invest in the stock market when they leave campus.
Many universities and colleges have recognized the importance of financial education and have started offering personal finance courses. This is a great starting step toward improving college students' financial wellness. However, financial literacy courses must become mandatory for all students, for three reasons.
Research shows that students who have access to high-quality financial education have better financial outcomes as adults that result in less debt and a higher quality of life.
Clearly, greater financial education is needed in the U.S. By majoring in finance, you have the opportunity to potentially lay the foundation for your own financial health. You will be taught how to make wise, forward-thinking decisions that can potentially pay dividends now and in the future.
Current Financial Literacy Is Lacking
It includes fundamental financial knowledge such as budgeting, saving, investing, and managing debt. However, studies have shown that many college graduates lack the financial literacy necessary to make informed decisions about their finances.
We don't have enough instructors to teach finance classes (see reason #1) Personal finance isn't part of the ACT or SAT – if it's not tested it's not taught. Education is up to the states, not the feds, and each state has different ideas. There isn't much agreement as to which finance concepts would be taught.
However, a growing percentage of U.S. adults (29%) claim to be very financially literate, although still a lower percentage than in 2021. The findings suggest a decrease in financial literacy over the past two years, but a slight uptick from 2022.
Despite the importance of financial literacy, a staggering number of students and young adults are not prepared to manage their money effectively. According to a survey of 30,000 people held by AIG Retirement Services and EVERFI, almost half of college students reported feeling unprepared to manage their finances.
Cons of Teaching Financial Literacy in Schools
Since this topic often involves complex math and advanced concepts, it can quickly go over the heads of some students who may not understand the issues being discussed.
Another concern some may have is that financial literacy is that some who believe themselves to be financially literate could overestimate their ability to manage money. This overconfidence could lead them to make poor decisions, such as taking on too much debt or investing in high-risk ventures.
What college degree is best for financial literacy?
For a student that is entering college with the goal of becoming a financial advisor, a strong prospect is to pursue a business degree with a concentration in finance. While studying business, students gain a broad understanding of banking and economics, which are important topics in understanding financial planning.
Finance is a high-stakes industry—individuals and corporations won't trust their financial future to just anyone. That's why getting a finance degree is extremely valuable.
Financial literacy is the learning and understanding of how to manage money in the real world. You will use math in your everyday life to make solid financial decisions. There are several financial literacy topics in which mathematical processes are utilized: taxes, interest on savings and interest on debt.
The Ohio State University's National Student Financial Wellness Study found that 72 percent of college students experience financial stress stemming from the fear of being unable to meet tuition costs (60 percent) and meet monthly expenses (50 percent).
The Lack of Personal Finance Education in America
America's lack of personal finance education is undeniable: Only 17% of U.S. adults said they took a personal finance class in high school.
According to data from the National Center for Education Statistics, in the 2019-2020 school year, 61% of bachelor's recipients had student loan debt. Levels of borrowing varied by race/ethnicity. Black students had a much higher rate of student loan borrowing.
In fact, much of the downward trend in financial literacy can be traced back to respondents increasingly selecting “don't know” as their response option to the underlying questions. The rise in “don't know” responses accounts for 75 percent of the drop in financial knowledge from 2009 to 2021.
Lack of Financial Education in Schools
Many education systems (including grade school and college) don't teach students practical financial skills, leaving young people ill-prepared to become savvy or responsible adults in this regard.
No one knows how to teach financial literacy
As the result of the school system's lack of modernization, experts who teach financial literacy are few and far between. Many teachers unfortunately lack the knowledge themselves on financial literacy, they are ill prepared to teach it to the next generation of students.
According to the US National Association of Plan Advisors (NAPA), Gen Z has the lowest level of financial literacy, with only 28% of questions being answered correctly on average.
Are rich people more financially literate?
Rich adults have better financial skills than the poor (Figure 7). Of adults living in the richest 60 percent of households in the major emerging economies, 31 percent are financially literate, against 23 percent of adults who live in the poorest 40 percent of households.
The countries with the highest financial literacy rates are Australia, Canada, Denmark, Finland, Germany, Israel, the Netherlands, Norway, Sweden, and the United Kingdom, where about 65 percent or more of adults are financially literate.
The US ranks 14th in financial literacy.
The number 1 country in the world for financial literacy is actually Denmark, where approximately 71% of all adult citizens are considered financially literate.
Students can better manage their money, avoid common financial pitfalls, and plan for long-term goals, ultimately setting a foundation for a more prosperous and independent future. It also fosters responsible financial behaviors and helps students contribute positively to their communities and the broader economy.
Unlike soft skills, hard skills refer to practical, tangible abilities versus personality traits. Employers value both hard skills and soft skills when hiring candidates. Students completing a co-op placement may also be asked to complete a qualification test to validate their hard skills such as financial literacy.