FINANCIAL LITERACY

Financial Literacy: The Best Knowledge

1
FINANCIAL LITERACY

Abstract
Financial Literacy is something that many have learned and mastered, but many

have also failed to add to their plethora of knowledge. There are millionaires who had the

financial knowledge passed down to them, business owners who taught themselves, and others

who learned a variety of different ways. Financial Knowledge should be something more

widespread. There should be less homelessness and lower middle class. There should be more

attention paid to the financial well being of Americans. The purpose of this literary review is to

teach readers what financial literacy is, and how the United States can do better at educating and

implementing the topic using these three questions: What is financial literacy and why is it

important, How is the United States government and their citizens implementing financial

literacy, and What can be done to make citizens more financially literate.

Key words: financial literacy, United States. Government,

2
FINANCIAL LITERACY

What is financial literacy and why is it important?

ability to use knowledge and skills to manage financial resources effectively for a lifetime of

financial well-being,” which was introduced in 2008 by the Jump$tart coalition for personal

financial literacy (Migliaccio p. 13, 2021). An earlier definition also mentioned in Taking the

High Ground on Financial Literacy, formulated by the NEFE is as follows, “the development,

acquisition, maintenance, and conservation of scarce resources that allow families and

individuals, as they interact with the world around them, to better their levels of living.” In a

nutshell, financial literacy is being able to manage your finances responsibly. It is one of the

most important things a person could know.

Many people know the quote “money makes the world go ‘round,” and as we mature that

deems to be more true. If a person doesn’t know how to manage their money and be financially

literate, they simply won’t survive the adult world. In order to thrive, a person has to be able to

pay their bills on time, manage their credit, budget, fill out taxes, the list goes on; Financial

literacy is being able to do those things efficiently. If a person does not adequately manage their

finances, it can result in repossession of vehicles, eviction, and especially bad credit. The

consequences are quite grave for not taking care of your expenses. A reason why financial

literacy is important is because it can make or break generations to come. A family who

generates wealth (with credit due to being financially literate) will ensure future generations

don’t have to struggle for income. The opposite can also happen if a family does not prepare.

Debt can be left to children whose parents weren’t smart with their money and didn’t think about

the future. Reasons like the ones’ stated are why it is even more important to know the important

topics in financial literacy, which can prevent those types of situations from happening.

3
FINANCIAL LITERACY

Davies, P. 2015

How is the United States government and their citizens implementing financial literacy?
In the United States, Financial literacy is somewhat being implemented, but it isn’t that

widespread. The government believes that the current system of financial regulation if

fundamentally flawed and needs to be replaced (Davies, P. 2015). In a survey reported by

Mendell and Klein in 2007, 28.9% of respondents thought that financial difficulty was due to not

have a financial plan (Davies, P. 2015), which financial literacy would teach them how to do

efficiently. One of the few efforts by state governments is many high schools in numerous states

have courses that introduce students to different topics regarding finance, such as mortgage and

credit cards. For example, high schools in Nebraska require a personal finance course to

graduate. In a survey of 20 Langston university students, 70% stated they had not taken a finance

course in high school. In Harsimran Chohan’s Tedx talk, she mentions the realization of how

high school courses don’t equal reality, and how little prepared she was for life after high school.

She says “the hard truth is that a research paper score does not hold equivalent value to a FICO

credit score in the real world… I am not ready for financial independence,” [Tedx Talks.] Her

account is one that many high schoolers and teens can relate to. When a group of 20 Langston

university students between the ages o f18 and 22 were asked “Do you feel as if you are ready to

handle your finances independently and efficiently,” 50% said somewhat, and 40% said no.

Many adult Americans teach themselves with books, online seminars of well-off internet

moguls, or learning from past mistakes or mistakes of their loved ones. There are also

4
FINANCIAL LITERACY

individuals who make it a goal to teach others about financial literacy, and help spread

knowledge. Bryan Hanley was a former mortgage loan officer who was featured in New York

Amsterdam Newspaper, and he held bi-monthly seminars to teach financial literacy and before

that was a part of the Minority Investors Network student club at his university. According to

Hanly, being financially knowledgeable provides the foundation for individuals to become more

responsible with their money (Murray, L.A. 2007). He made it a goal to teach African Americans

more about finances, and especially that it is not a taboo subject to speak about.

Warmath, D., & Zimmerman, D. (2019).

What can be done to make citizens more financially literate?

There are many ways financial literacy can be made more prevalent. Beginning with the

education system, there should be more courses teaching students how to navigate their finances

in a realistic manner, not just breezing through material to obtain a grade. When Langston

university students were asked “what more can the government do to implement financial

literacy,” some of the answers included mandating standardized financial literacy courses, more

classes over financial literacy should be taught, and even taking away credit cards was suggested.

5
FINANCIAL LITERACY

One student said “I wish as a country, we were able to have financial support in ways that can

hold us accountable but also not put us in debt for life.” Students should be taught how to file

taxes, apply for an apartment/house, read their bills, apply for credit cards, and whatever else is

deemed important for the near future. There should also be more groups to help with the cause.

College possible is an example of a group that teaches students ways they can pay for college,

and helps them find scholarships, internships, etc. There should also be groups to teach students

about other finances.

As far as teaching financial literacy to adults, there can be groups made for them as well.

Events and classes can be held by outreach groups, banks, tax companies, and other financial

companies. In Towards Framework for Financial Literacy in the Context of Democracy, the

Mendell and Klein survey shows that some adults thought not being able to earn enough money

was the root of financial difficulty, and there should be people out there to teach them how to

obtain more income and how to live more financially comfortable.

A majority of United States finance related businesses don’t have customers best interest

at heart, and that also has to change to help spread financial knowledge. The government must

improve the economy and the way it runs ultimately, which would be the best change possible.

The focus is more on gaining money than helping their citizens gain financial freedom which

should be a top goal of the United States government and finance related companies, and

employers.

6
FINANCIAL LITERACY

Findings

The above literature analysis revealed these key findings:

- Many young people feel as if they aren’t ready to handle their own finances

- The united states does little to implement financial literacy

- Financial literacy is not a heavily spoken subject. Many struggle in silence regarding their

finances.

- There’s more the government can do to spread financial literacy

Conclusion

All in all, financial literacy as defined by the United States as “The ability to use

knowledge and skills to manage financial resources effectively for a lifetime of financial well-

being,” Many people struggle with financial tasks and/or don’t know how to do those tasks at all.

Many young people also feel as if they are not ready independently handle their own financial

tasks. The United States does very little to spread financial literacy amongst its citizens. More

can be done by the government to help teach Americans how to be financially knowledgeable.

The benefits of being financially literate are endless and every person deserves to have the tools

they need to succeed.

7
FINANCIAL LITERACY

References:

Warmath, D., & Zimmerman, D. (2019). Financial Literacy as More than Knowledge: The Development of a
Formative Scale through the Lens of Bloom’s Domains of Knowledge. Journal of Consumer Affairs, 53(4), 1602–
1629. https://doi.org/10.1111/joca.12286

Davies, P. (2015). Towards a framework for financial literacy in the context of democracy. Journal of
Curriculum Studies, 47(2), 300–316. https://doi.org/10.1080/00220272.2014.934717

Murray, L. A. (2007, September 13). Breaking down the blurred barriers of financial illiteracy. New York
Amsterdam News, 98(38), 5.

Migliaccio, J. N. (2021). Taking the High Ground on Financial Literacy. Journal of Financial Service
Professionals, 75(6), 12–18. https://web.s.ebscohost.com/ehost/detail/detail?vid=3&sid=27480981-ad11-44c8-a010-
0507306728e9%40redis&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=153399543&db=buh

[Tedx Talks]. (2021, February 9). An Epidemic: A lack of Financial Literacy | Harsimran Chohan |
TEDxSacredHeartSchoolsAtherton [Video]. Youtube.com. An Epidemic: A lack of Financial Literacy | Harsimran
Chohan | TEDxSacredHeartSchoolsAtherton