Financial literacy is the ability to understand how money works in the world: how someone manages it, invests it, and how that person donates it to help others.
18% of American 15 year olds could not answer basic financial questions or handle simple tasks, like understanding an invoice, in a recent study. The United States has one of the most developed financial markets in the world, and given the decisions young people are already asked to make, like whether to take out student loans, makes learning basic financial skills crucial to a young person’s success in the world.
Including mandatory financial literacy as a requirement for high school graduation is critical to creating a generation that is knowledgeable and capable of smart consumer choices. Many educators believe that financial literacy can be taught as young as elementary school.
There is correlation between socioeconomic background and financial literacy levels in the United States. It has often been said, “It is expensive to be poor.” Those who are poor are more likely to rent, pay for things over time, and borrow from high interest institutions, including pay day loan businesses. And they are more likely to have had no financial literacy education.