Since 2005, Congress has designated April as Financial Literacy Month, a time to highlight the need to improve Americans’ credit and money management skills. Yet despite efforts to raise awareness and the explosion of online information and tools available to almost anyone, the need for more and better financial education remains acute.
A few recent surveys reveal just how much work remains to be done. A Harris Poll conducted for the National Federation of Credit Counselors and Wells Fargo found that 38% of adults, or nearly 4 in 10, have consistent credit card balances from month to month. With an average interest rate of nearly 15% and some examples exceeding 30%, credit card debt is one of the biggest budget breakers. The poll also found that less than 1 in 3 had a clear plan for paying off their debt.
While total credit card debt has fallen since the start of the pandemic, balances are growing rapidly again and now total $856 billion. Credit card debt rose in the fourth quarter of 2021 by the largest amount in the 22 years the bank has collected data, according to the Federal Reserve Bank of New York. Add to that the massive student loan debt of $1.75 trillion, and it’s obvious how difficult it has become for young households to settle down.
Meanwhile, a survey by Investopedia found that 41% of millennials said they have an “advanced understanding” of cryptocurrencies and 28% plan to rely on them to fund their retirement. According to Fidelity Investments, nearly half of millennials say they stopped saving money “until things get back to normal.” And among Gen Z, whose expected median retirement age is 57, 45% rely on YouTube for financial advice while 30% turn to TikTok for help.
While Tennessee has made strides in improving financial literacy, our state has a lot of work to do. An annual study by financial and credit advice website WalletHub places Tennessee near the bottom in overall financial literacy, ahead only of Kentucky and Arkansas. Tennessians also have the lowest share of adults with an emergency fund and rank third in the nation in bankruptcy filings per capita.
Where to start? Of course, at home. But while 85% of Americans say the primary responsibility for financial education lies with parents, 55% rarely or never discuss finances with their children according to a CNBC/Acorns survey. And many of those parents don’t feel safe discussing the issue themselves.
The push for more formal teaching about basic financial decision-making in schools is gaining momentum. Today, 25 states have adopted a formal requirement of at least an introduction to financial literacy in high school before graduation, including Tennessee. But to really make a lasting difference, financial literacy needs to be built into the curriculum much earlier and more consistently.
The Tennessee Financial Literacy Commission was established in 2010 to promote good decision-making skills and improve the financial well-being and economic mobility of Tennessee residents. Yet, despite the exceptional efforts of the commission, the program and the resources it makes available still rely on voluntary adoption by dedicated educators and rely heavily on private donations for funding.
Earlier this month, the state General Assembly nearly took a huge step forward by inserting basic money, credit, insurance, and budgeting education into the sixth-grade curriculum. and eighth grade, then backed off at the last second. The bill passed the House on April 12 was amended at the 11th hour to “encourage” rather than require the financial literacy course. Another missed opportunity.
The resistance to another educational mandate is understandable. But in today’s complex environment, financial literacy is just as critical to affecting the lives of Tennesseans as the other fundamentals of education.
Christopher A. Hopkins is a Chartered Financial Analyst.