The financial world that consumers must navigate has changed significantly and grown more complex, increasing the need for financial literacy and raising questions regarding consumers’ financial capability.
Financial literacy focuses on the specific knowledge and concepts consumers need to manage their money and build wealth, depending on an individual’s situation. It may mean learning how to create and manage a household budget, learning how to invest money for retirement, or participating in one-on-one coaching and counseling to determine how to buy a house or start a business. It also can be part of an overall strategy to increase economic security for lower-income families.
Financial literacy is one factor in the larger analysis of the financial capability of consumers, which is the broader picture of how consumers manage their resources and how they use their financial literacy to make financial decisions.
The chart below lists state legislation introduced or pending during the 2016 legislative session relating to financial literacy or financial education. Twenty-five states and Puerto Rico had pending financial literacy legislation in 2016. Thirteen states enacted legislation or adopted resolutions regarding financial literacy and financial education issues.
California enacted two bills. The first authorizes a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The second requires the Instructional Quality Commission, when the history-social science curriculum framework is revised after Jan. 1, 2017, to consider including age-appropriate information for kindergarten and grades 1 to 12, inclusive, on financial literacy, as specified.
Delaware enacted legislation that will establish a task force to study and make findings concerning financial literacy education in Delaware public schools and make policy recommendations to increase the financial literacy of Delaware students. Florida passed a bill establishing the Financial Literacy Program for Individuals with Developmental Disabilities within the Department of Financial Services. Louisiana enacted legislation to require public elementary or secondary schools to offer instruction in personal financial management. Maryland altered the composition of the Financial Education and Capability Commission to include one representative of a nonprofit organization in the state that provides financial assistance and free financial education to state residents for postsecondary education.
Michigan enacted two bills. The first enacts the "Michigan Junior Achievement Fund Act" to do the following: (i) Create the "Michigan Junior Achievement Fund" in the Department of Treasury to provide funds for donation to any Junior Achievement organization in the state. (ii) Require money from a proposed tax check-off to be credited to the Fund. (iii) Require the Department to distribute the funds to the Junior Achievement of Michigan Great Lakes organization for distribution to other Junior Achievement organizations in the state. (iv) Allow money in the Fund to be used as matching funds for a federal grant if the funds were to be used for certain purposes. The second requires the Department of Insurance and Financial Services to develop and make available to local units of government, financial institutions, and other interested persons one or more model programs for financial education.
The New Mexico House of Representatives adopted a resolution requesting the public education department and the workforce solutions department to study and develop recommendations to increase the number of high school students who take financial literacy education classes. New York added financial literacy and elder abuse education and outreach to the list of congregate services provided by a public or a government agency or non-profit agency which are provided in community settings at which elderly people come together for services and activities. Ohio required the chancellor of Higher Education to create the SmartOhio Financial Literacy Pilot Program at the University of Cincinnati to operate for the 2016-2017 school year. Virginia enacted a bill requiring the Department of Corrections to offer prisoners prior to release the opportunity to participate in a transition program to include advice for job training opportunities, recommendations for living a law-abiding life, and financial literacy information. And, Wisconsin will require institutions of higher education to provide information to students relating to educational costs and financial literacy.
California, Florida, Pennsylvania and Rhode Island adopted resolutions recognizing April as Financial Literacy Month.
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Heather Morton is a program principal in Fiscal Affairs. She covers financial services, alcohol production and sales, and medical malpractice issues for NCSL.