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Financial literacy: educating young people to be right about money

Silver. Everyone wants it. But not everyone understands this. Financial literacy in America is not only low, but has steadily declined over time. This is the conclusion of to research Finra, the Financial Sector Regulatory Authority. In 2009, the average respondent to their triennial survey could correctly answer three of the five simple financial literacy questions. By 2021, that number had dropped to 2.6. Worse still, out of more than 27,000 respondents, only 4% were able to answer all questions correctly. This suggests that many lack a basic understanding of concepts such as inflation, compound interest, and risk diversification. study conducted by Standard & Poor’s rating services came up with equally dismal findings. The United States is ranked 14th in terms of financial literacy, behind Singapore and the Czech Republic. Norway, Denmark and Sweden are tied for first place. The problem has real-world implications. Americans collectively lose billions of dollars each year in unnecessary interest payments and investment costs, among other things. At the same time, it has become more difficult to make sound financial decisions given the increasing complexity of new financial products and services in the market. Some argue that below-average financial literacy combined with predatory lending helped precipitate the subprime crisis and the spectacular crypto boom and bust. Digital savvy doesn’t equal financial acumen An obvious solution is to provide more financial education. The importance of improving understanding of how money works, particularly among disadvantaged groups, prompted the FT to set up a charitable foundation the Campaign for Financial Literacy and Inclusion (FLIC)Currently, 23 US states require high school students to pass a financial literacy course before they can graduate. On paper, this makes sense given that young people are likely to face greater financial challenges than previous generations. In practice, it can be difficult to instill financial literacy in teenagers when they are still so far away from having to personally deal with things like mortgages or credit card payments.FT FLIC

Donate to the Financial Education and Inclusion Campaign hereFinancial education is not a panacea. Despite the increase in personal finance courses in American schools over the past 24 years, Americans continue to be drowning in debt. But a lack of expertise compounds the risks of poor decision-making. As the economic downturn deepens, tackling financial ignorance has never been more crucial.