Too many Texans, one out of five adults, struggle with basic literacy. Far more, three of five, would fail the U.S. citizenship exam. Beyond civic literacy and literacy itself, Americans also have poor economic and financial literacy. Too many of us make terrible decisions, fail to budget, and run up our debt. With so many Americans unemployed in the COVID-19 era, the situation is urgent.
For kids, financial and economic education should start early. Because so many public schools have not succeeded, the private sector has developed options. The Foundation for Economic Education (FEE) and the Council for Economic Education (CEE) are just two of several organizations that help students and their teachers understand core concepts and use them in daily decision-making.
CEE offers an excellent quiz. When resources are scarce, what happens? How do budget-savvy consumers react? Who benefits from an economic transaction, and who loses when government interferes?
Americans tend to fail such quizzes. When the private Financial Industry Regulatory Authority (FINRA) asked adults six basic questions about personal finance and economics, only 40 % could answer at least four of them correctly. Over the past decade, financial literacy has declined severely. FINRA found steep drops among adults under age 55.
For adults, who must manage their own budgets, innumeracy is a significant problem. Math skills beyond addition and subtraction, like calculating percentages, are in short supply. Many make tradeoffs of time and money but do not think much about it. Many choose short-term fixes instead of long-term strategies. In an economy based on personal responsibility, these problems can be severe.
For example, very large numbers of people miss extra years of earning and increase their debt because they take more than four years to graduate from college. Others, who do have plans, finance college with full-time jobs so that their six or eight years of postsecondary education become debt-free. Very many others, however, leave college without a degree and with little education to show for it.
By and large, colleges do not require financial literacy or any economics course. In a 2018 study, only 29 % of adults remembered even the existence of financial education at school or work. We see the results when large numbers of young adults claim to favor socialism over capitalism but cannot define either, do not know any history of places where socialism has been tried, and cannot predict what really happens when government interferes with supply and demand.
Should the government do anything to encourage financial literacy? America became the richest and most flourishing country in the world because the government tends to leave private markets alone, more or less. The agencies with best results are often the ones that are skeptical of their own power. But there is one interagency body, at least, that has tried to help: the U.S. Financial Literacy and Education Commission, or FLEC.
FLEC just issued its latest report. Unfortunately, the report is about the same every year: Lots of talk, little successful action, and no progress from most of the 23 agencies involved. Of course, Congress ultimately controls the budgets, and CARES Act pandemic-related funding may enable some agencies to do more. Yet there is not much to do from far-away Washington without local knowledge of how to be effective.
The Center for Financial Literacy at Champlain College gives Texas schools a B for financial literacy, and CEE reports six affiliates in Texas. But the American Council of Trustees and Alumni finds that just one Texas college out of 51 examined—the University of Dallas—requires economics. And the center at Champlain puts Texas near the bottom, with an F for financial knowledge, in adult financial literacy.
For good input on how to improve Texas and other states, check out some of these reports. Then, consider action. Remember that private organizations and philanthropy can be nimble where government agencies can be slow. While just-in-time, one-on-one financial counseling can save consumers from making terrible choices in the moment, look for ways to produce long-term understanding that serves people for their whole lives.
America has a spending problem, and so do many Americans. The least we can do is encourage one another to understand the personal and generational tradeoffs involved so that we all can make better choices for ourselves and our families.