Financial literacy is one of the building blocks for creating financial security and capability.
It can start with the basic functions of money and budgeting and build to include topics such as credit scores, taxes, net worth, loans, refinancing, retirement and investment accounts, financial risk and exchange rates.
As technology and financial tools evolve, so do the concepts covered in financial literacy programs. Advocates believe establishing a strong base of financial literacy can help young people to tailor their future financial education to meet their specific interests and needs.
Americans Struggle With Financial Literacy
Since 2017, the TIAA Institute and the George Washington University and Global Financial Literacy Center have surveyed U.S. adults to measure their financial literacy. Results of the 2023 Personal Finance Index show a decline in financial well-being compared with survey results in 2022.
Since 2017, the survey has asked 28 questions covering knowledge of eight personal financial concepts: borrowing, saving, consuming, earning, go-to info sources, investing, insuring and comprehending risk.
Correct responses hover around 50% each year, with a peak of 52% in 2020 and a low of 48% in 2023. Of the eight concepts, comprehending risk has consistently ranked lowest in correctly answered questions, with an average of 39% of questions answered correctly in 2017 and 35% in 2023.
Financial literacy often starts at home and in school. At the start of the 2022-23 school year, K-12 schools in 30 states, Puerto Rico and the U.S. Virgin Islands required students to receive financial literacy programming.
Idaho and West Virginia plan to begin similar programming in the next two years. In March, Idaho enacted provisions requiring at least one course in financial literacy for grades nine through 12 in school districts, specially charted districts and public charter schools throughout the state, effective July 1. The curriculum must include financial literacy competencies defined in statute. And West Virginia required students to complete a personal finance course in their junior or senior year, starting with students entering grade nine in 2024.
Additionally, the Indiana General Assembly in April changed the state’s financial literacy education requirements to create a stand-alone course for high school students with content areas defined in statute.
At least 41 states, Puerto Rico and Washington, D.C., have financial literacy bills pending in the 2023 legislative session.
In addition to bills on K-12 course and curriculum requirements, states have introduced financial literacy legislation targeting adults and specific populations with programming as a component of college courses, prison education, alternative sentencing requirements, homeownership courses, and capacity-building for immigrant communities.
Iris Nott is a policy analyst in NCSL’s Financial Services, Technology and Communications Program.