The push for financial literacy education has been growing across the country in recent years, and for good reason. The proven benefits for mental health, stress reduction, job performance, and financial success are undeniable. Studies by private companies, government organizations, and academic institutions all point to the outsized positive impacts of basic financial lessons on individuals as young as middle school and as old as retirees.
Despite this overwhelming tidal wave of evidence, the US as a country has a long way to go before we are adequately preparing our children and workforce with the knowledge and skills to elevate their financial prospects in the future. Per Next Gen Personal Finance’s 2022 report, only 22.7% of US high school graduates are guaranteed to receive one semester of personal finance education. Fifteen states have passed legislation enshrining this mandate in state law but only eight of those states have fully implemented these rules. This is tremendous progress but still leaves 3 out of 4 students without adequate financial education to navigate our increasingly complex financial ecosystem.
An earlier report from NGPF in 2020 broke down the math on just home impactful this school-age education can really be. They projected that a financial literacy program for a class of 24 students could create $360,000 in value from only a $10,000 investment. A 36-to-1 ratio of benefits! When it comes to stock investing, a 10-bagger (10-to-1 ratio of growth to investment) is considered a superior achievement. More than tripling this kind of goal is an astronomical result. We cannot turn down the opportunity to put our children in a position to excel in life when the future is truly in their hands.
If that hypothetical example isn’t enough, looking at the benefits for existing workers shows as great of an impact. Below are two additional studies reporting the benefits of financial education on working adults:
FDIC Longitudinal Study Findings - Money Smart Financial Education
69% reported an increase in savings
53% reported decreased debt
43% of those without a checking account opened one following the course
22% with a checking account switched their account to a different institution
37% without a savings account opened one
+12% point increase (43% -> 55%) increase in respondents reporting “always” paying their bills on time
Dartmouth College Study (reported by NFEC)
“[Those] attending an employer-sponsored retirement seminar saw net worth increase by nearly 27% for those who were in the lowest income bracket and had not received a high school diploma.”
An educational institution is the best place to begin teaching our children how to build a strong financial foundation, but education doesn’t end after graduation. Employers have a responsibility to help employees build their financial literacy. It pays off for employees and employers alike. A joint study conducted by TIAA-CREF and Global Financial Literacy Excellence Center (GFLEC) found that low financial literacy can have significant negative effects on workplace performance.
“Of particular note is first-time data regarding how much time U.S. adults spend thinking about and dealing with issues and problems related to their personal finances, including time spent doing so while on the job. Those with high levels of financial literacy spend three hours per week, on average, thinking about and dealing with personal finance issues. By comparison, those with low financial literacy spend an average of 12 hours per week on personal finance issues.”
Therefore, their recommendation is clear: “Improving employee productivity by decreasing the amount of work time lost to personal finance issues is a primary motivation for employer-sponsored financial wellness programs, and addressing low financial literacy should be a key element of such programs.”
The evidence could not be more clear. Whether in school or in the workplace, financial education is a powerful transformational tool.
What are you waiting for?