As a Personal Finance Writer, I Have Mixed Feelings About Financial Literacy

Our experts answer readers’ investing questions and write unbiased product reviews (here’s how we assess investing products). Paid non-client promotion: In some cases, we receive a commission from our partners. Our opinions are always our own.There is a growing interest in financial media and education. It’s wonderful to imagine the US is more invested in the well-being of its citizens and that folks are more interested in taking charge of their finances.But what do we mean when we talk about “financial literacy”?When I look beneath the surface, financial literacy seems less about promoting socioeconomic prosperity and more about perpetuating the American reliance on rugged individualism that absolves our culture of any responsibility for the well-being of its constituents.The National Standards for Personal Financial Education, as well as similar standards outlined by many states, focus entirely on individual choices and responsibilities. There’s no standard for a discussion of how systemic forces shape our financial circumstances. They reflect the foundations of what I call budget culture, the dominant paradigm around money that deploys messages of restriction, discipline, perfectionism, and shame to shift focus from systemic inequalities to individual choices.Teaching money management skills while ignoring the obvious forces that keep some people in poverty while propping up others into wealth reinforces the pull-yourself-up-by-your-bootstraps mentality too common in our culture. It feeds students the false narrative that anyone can be rich if they simply make the right choices and, therefore, creates deep shame in those unable to meet that standard.Teaching personal finance in this way reinforces cultural biases. In addition to internalizing shame about their own financial choices, students stand to internalize long-standing racist, sexist, and ableist messages about things like who deserves wealth, what constitutes a good work ethic, and which purchases are considered “wants” versus “needs.”Like all areas of education, financial education suffers from disparities in school funding, which exacerbate racial inequality. Even with a financial education mandate in a state, students across school districts have unequal access to comprehensive, culturally competent financial education, because each district’s access to resources is different.In an audit by the Utah State Board of Education, published 10 years after the state enacted a general financial literacy graduation requirement, demographic disparities in proficiency with personal finance topics remain stark:The report noted these proficiency outcomes are consistent with national data.Financial experts like to look at that data and prescribe financial education as a solution, but the data in Utah shows that “literacy” isn’t enough. Information alone can’t overcome systemic barriers and cultural biases.As one instructor told the USBE auditors, “Financial literacy is critical to the financial well-being of our country. The return on investment for this class is priceless, and the worth would be hard to measure.”Well, the worth of these classes is, in fact, being measured — empirically — and the results are lackluster.The problems with financial education aren’t surprising, given the lack of attention the subject receives from decision-makers.In my conversations with financial educators, the No. 1 concern I hear is that financial education is sorely underfunded. While nine states require a dedicated personal finance course and 14 additional states require some personal finance coursework, most of these are unfunded mandates — lawmakers pass the requirement but don’t allocate budget accordingly.Personal finance media, gurus, and educators love to tout financial literacy as the missing puzzle piece to the American dream.As financial education spreads across states, it does have the potential to change the trajectory of financial well-being in our country. But that won’t happen if it remains just one more place in education that embodies systemic inequalities and cultural biases.Until financial education includes teaching students about practices like redlining and discrimination against LGBTQ+ folks in banking and lending — and steps are taken to undo the harm caused by these practices — teaching students how to budget is a flaccid attempt at financial well-being.Start Saving with a No-penalty CDThe best no-penalty CDs are a good way to lock in higher rates on CDs without facing penalties if you need to withdraw funds before the maturity date. CIT Bank CD rates and Raisin CDs are popular no-penalty CD options.This story was originally published in April 2023.

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