Despite living in the largest economic powerhouse in the world, Americans don’t fully understand their own finances.

4 minute read

Seventeen states in the U.S. currently require students to pass a personal finance course to graduate from high school – but Americans want all 50 to.

That’s according to a survey from credit bureau Equifax.[1] The vast majority (90 percent) of Americans think students need to take personal finance courses at the K-12 education level.’s chairman Howard Dvorkin, CPA has been preaching this point for years.

“I can’t think of many initiatives more noncontroversial than teaching Americans to save more and spend wisely,” Dvorkin says. “Isn’t it worth the effort?”

What is financial literacy, and why is it so important?

Financial literacy is the understanding of finances. This involves simple budgeting, saving and debt management, but also investing, and understanding taxes.

Financial ignorance can lead to poor money management decisions. Americans collectively hold a whopping total of $13 trillion of personal debt, including mortgages, credit cards, and student loans. And Americans know they don’t understand how to manage their money well.

Equifax’s poll asked Americans to grade their level of financial literacy. Only 39 percent gave themselves a B. Twenty-nine percent of those aged 18-29 gave themselves that grade, while another 33 percent graded a C.

Americans must be grading themselves on a curve because the Champlain College Center for Financial Literacy says different.

It gave 27 states a C or below, and nine states an F, according to its 2017 Financial Report Card.[2]

How is financial ignorance hurting us?

Americans estimate they could’ve held on to nearly $1,200 last year had they learned how to manage money better, says an online survey from the National Financial Educators Council.[3]

More than 1,500 U.S. adults were asked one question by the NFEC: “During the past year (2018), about how much money do you think you lost because you lacked knowledge about personal finances?” The average response: $1,230.

Forty-one percent of Americans estimate they lost $500 and 20 percent say up to $2,500, the survey reports. That number adds up fast over our lifetimes – the organization estimates $30,000.

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American teens can’t compete in financial knowledge around the world

On an exam that measures students around the world in mathematics, science, and financial literacy, almost 22 percent of 15-year-olds from the U.S. scored below a passing grade, says the National Center for Educational Statistics. [4]

The test on basic money knowledge has been administered twice – and Americans failed it both times.

Despite living in the country with the largest economy in the world, American teens continue to struggle with basic financial skills.

While this is only the second time the test has been given, we don’t look great. America finished below the worldwide average with the same score both times.

Just how well did we do?

When compared to the other countries that participated, America had mixed results:

  • China, Belgium, Russia, the Netherlands, and Australia scored higher than both the U.S. and the worldwide average. China led all countries in the study.
  • Poland, Italy, Spain, Lithuania, Slovakia, Peru, Chile, and Brazil all scored below the worldwide average.
  • Scored as if they were individual countries, both Massachusetts and South Carolina scored higher than the U.S average. If they were ranked with the other countries, Massachusetts would have finished fourth.

It’s interesting that Massachusetts and South Carolina performed better than the U.S. In a separate study from FINRA which we included in our map of U.S. financial literacy, neither did especially well and Massachusetts was near the bottom of the pack. That suggests we all need to improve.

Parents can’t teach financial literacy

Some 77 percent of parents say they’re comfortable teaching their kids saving and budget basics, but most pull up short with more complicated concepts such as investing and retirement, according to U.S. Bank. [5]
More than half share their wisdom on credit. Sometimes, however, they aren’t so wise. Just over half of parents think the balance in your savings account affects your credit score. (It does not.) And 52 percent believe debit cards and checks can boost your credit score. (They can’t.)

Interestingly, schools and parents tend to clash on what they teach their children about money management, creating confusion for kids and students.

Improving financial education in schools

Fifty-three percent of young adults who took financial literacy courses in school were still unprepared to handle their finances as an adult, says a study from investment group T. Rowe Price.[6]

Out of those same students, 34 percent said they’ve listened more to what their parents have taught about personal finances. That’s four times higher than those who listened to what their school taught them (8 percent). And parents aren’t sure they can teach effectively. Only 37 percent of parents who have felt they did “very well” teaching their kids personal finances.

“Over the years, we’ve found that financial education works best when schools and parents work together to help kids understand money matters,” says Stuart Ritter, a senior financial planner at T. Rowe Price. “Even though financial education in both school and home has shown to be effective in preparing kids for ‘adulting’ responsibilities, it’s not perfect.”

It’s not that education in school was a wasted effort for them, either. Eighty-eight percent say they still rely on the financial education that they learned while in high school as adults. And 86 percent say financial education should be taught in all schools, while 84 percent said they’re happy they received financial education in school.

Ritter thinks that parents and teachers conspiring on what they’ll teach kids will make for the best results.

“We know that many parents have some reluctance to discuss money matters with their kids and that, oftentimes, kids begin making, spending, and saving money before parents or educators have helped them understand how it works,” Ritter says. “There’s an opportunity for parents and educators to have money conversations more consistently, sooner, and broaden the dialogue to include longer-term goals.”

Cameren Boatner contributed to this report.

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About the Author

Joe Pye

Joe Pye

Joe Pye began writing about debt and personal finance more than three years ago while attending Florida Atlantic Univerisity, where he served as Editor-in-Chief of the student-run newspaper, the University Press. Before graduating with a bachelor's degree in multimedia journalism, Pye placed as a finalist for the Mark of Excellence award by the Society of Professional Journalists Region 3 for feature writing and in-depth reporting. Since taking a full-time position as associate editor at in 2018, Pye has become a certified debt management professional who's applied what he's learned to his personal life by paying down more than $22,000 worth of combined credit card, student loan, auto and tax debt in less than two years. He maintains a frugal and debt-free lifestyle. Pye's goal is to uncover trends in the financial world and share his experiences to help readers stay out of debt.

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