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Financial Literacy: An Education Still in Progress

By Heather Morton  |  April 26, 2022

High levels of financial literacy continue to elude many Americans, according to the 2022 TIAA Institute-GFLEC Personal Finance Index. On average, U.S. adults correctly answered only 50% of the index questions in 2022, a level unchanged since the initial 2017 survey.

The index analyzes personal finance knowledge across eight areas:

  • Earning.
  • Consuming.
  • Saving.
  • Investing.
  • Borrowing and managing debt.
  • Insuring.
  • Comprehending risk.
  • Identifying and recognizing appropriate resources and advice.

The Personal Finance Index has found that financial well-being is linked to financial literacy. Those who correctly answered seven or fewer of the 28 questions are six times more likely to have difficulty making ends meet; three times more likely to be debt constrained; and four times more likely to spend at least 10 hours a week thinking about and dealing with issues and problems related to personal finances.

Questions about comprehending risk elicit the most wrong answers, with an average of only 36% answered correctly in 2022. Borrowing and managing debt consistently comes out on top, with 60% answered correctly.

Financial literacy tends to be low across the five generations—Generations Z, Y and X, the baby boomers and the silent generation—but it is lowest among those in early adulthood. In the index, generations are used to distinguish age groups, rather than true generational differences, so the greater financial literacy that tends to exist among baby boomers and the silent generation reflects knowledge typically acquired with life experience.

While 28% of adults have participated in a financial education course, the figure increases to 35% for Gen Z, but that still translates to only one-third of adults receiving some financial education.

State Actions

Twenty-eight states and the U.S. Virgin Islands require a financial literacy course or content to be taught or included in the education standards for K-12 students. Three states recently enacted new requirements for financial literacy courses.

In May 2021, Nebraska enacted the Financial Literacy Act, which requires all school districts to include financial literacy instruction in elementary and middle schools. The law, which goes into effect in 2023, also requires students to complete at least one five-credit high school course in personal finance or financial literacy prior to graduation.

Ohio SB 1 requires students who enter the ninth grade for the first time starting July 1, 2022, to complete a half unit of financial literacy instruction as part of the required high school curriculum, either as an elective course or in place of a half unit of mathematics.

Florida SB 1054 requires students entering the ninth grade in the 2023-24 school year to earn a half credit in personal finance and money management.

Thirty-seven states, Puerto Rico and the District of Columbia have addressed financial literacy through legislation in 2022.

Heather Morton is a senior fellow in NCSL’s Fiscal Affairs Program.

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