Why Americans Are Failing the Grade at Financial Literacy

Why Americans Are Failing the Grade at Financial Literacy

Hey, you Two Cents viewers! Here with a special announcement: Make sure
you make it to the end of the video where we get to share some exciting news! You’re pregnant again? Ha ha ha ha… The United States has the world’s largest
economy and our workers have some of the highest salaries in the world. But if you think that most Americans have
piles of money, great credit, and low amounts of debt, you’d be wrong! Since you’re following our channel, it’s
probably obvious to you that our financial literacy is at crisis levels, but have you
ever stopped to wonder what led us to this point? And more importantly…what can be done to
change it? In 2015, the S&P Global Financial Literacy
Survey asked 4 simple financial questions to respondents all over the world, and the
results landed the U.S. in 14th place for financial know-how. And it shows. Americans are failing the grade by nearly
every metric. Nearly 60% of U.S. households don’t keep
a budget. Two thirds would be unable to scrounge up
$1,000 for an emergency and 35% have a debt currently in collections. The average college student carries $30,000
in student loans, and floats a credit card balance of around $8,000. The median retirement savings for Americans
age 55-64 is around $100,000 – an amount that would translate to just $310/mo of income
in retirement. And it’s especially scary for our generation
— even though 69% of millennials rate their own financial knowledge highly, only 24% are
able to demonstrate “basic financial literacy”. One of the biggest factors is the lack of
any formal financial lessons in schools. Even though the Council for Economic Education
found that kids who receive financial education are more likely to save, more likely to pay
off their credit cards each month, and less likely to become compulsive buyers, only a
third of states currently offer it! And of those that do, most of them incorporate
the subject inside of another course of study, like economics, math, or social studies. Only five states require a semester-long course
focused on personal finance. But the problems don’t stop there. The minute high-schoolers graduate, they’ve
got a target on their backs and the financial industry is lying in wait. Credit card companies are notorious for luring
kids into high-interest credit cards with offers of T-shirts or a free pizza – despite
the fact that most students have little to no income and hardly any real-world financial
experience. Unfortunately, that trend of financial institutions
targeting the non-savvy doesn’t let up as you get older. Current rules in the US allow brokers (under
the guise of “financial advisors”) to put their own financial interests ahead of
consumers when selling a financial product. For real! To be fair, the financial industry does engage
in some education. But consider this…In 2013, the Consumer
Financial Protection Bureau reported that while $670 million dollars was spent by the
industry on consumer education, $17 billion dollars was spent on marketing their products. That’s a ratio of 25 to 1. Chump change. Make no mistake, the cumulative results of
people not saving enough or getting into financial trouble doesn’t just fall on them and their
families, but on society as a whole! So what can we do to help promote change? Consistently scoring at the top of such surveys
are the Scandinavian countries like Denmark, Norway and Sweden. There are a lot of reasons for this. In Sweden’s case, for instance, there is
a long cultural tradition of saving. No major disasters in the financial markets
to undermine trust in the system. And the presence of the Financial Supervisory
Authority, a strong government agency designed to regulate the entire financial services
industry. But probably most important is that kids are
taught about the basics of personal finances starting in the first grade and continuing
all the way up to high school. Changes have to be made to education here
in America if we’re to stand a chance of improving things. And you don’t have to be a parent to advocate
for a child’s right to quality financial education. You can look at this map to see what standards
for financial literacy your state currently mandates. You can also reach out to your state representative
to let them know what you’d like to see offered to future generations. Unfortunately, the primary reason cited for
not including this kind of education in schools is that it’s the parents job. But we all know that’s not really happening. Nearly half of Americans don’t talk with
their children about money at all. And it’s not because they don’t think
they should! It’s because most simply don’t know what
to say. If you’re a parent, or hope to be one someday,
you do not have to be an expert to teach kids about money. Simply getting them their own bank account
seems to have positive results with 15-year-olds scoring 40 points higher in financial literacy
than those without one. Kids also learn best by doing, so next time
you sit down to pay your bills online, call your kid over and coach them through how to
do it themselves! For bonus points, check out our previous video
about how to talk to kids about money! This is so important because if finances aren’t
talked about much growing up, we tend to continue that approach of avoidance even when we leave
home. We just stumble along assuming everyone knows
more than we do, afraid to call attention to our ignorance. And it’s that unspoken taboo around the
topic of money that allows this negative feedback loop to continue. Thankfully, it’s never been easier to take
your financial education into your own hands! The last decade has seen a tsunami of blogs,
podcasts, programs, books and courses aimed at filling in the adult education gap when
it comes to finance. And there are tons of amazing FREE or low-cost
resources out there. Hundreds of libraries all over the country
host “Money Smart Week’s where they cover topics like retirement, budgeting, and credit
— without any incentive to make you a paying customer! There’s also the National Endowment of Financial
Education’s website smartaboutmoney.org with lots of free courses. You can even ask your employer to bring in
a financial educator! After all, a better educated workforce is
in everyone’s interests. As a dedicated watcher of two cents, we hope
you continue to broaden your own financial education. And don’t keep the lessons you’re learning
all to yourself! We expect you to share your newly earned money
smarts with those you care about. Changing the face of financial literacy here
in the states and around the world is not just our job, it’s yours too! And that’s our two cents! The vast majority of financial education out there is funded by big corporations. We, and our co-creators, chose to partner with PBS specifically because we believe financial education should be free from “for-profit” hidden agendas. And over the last year it’s been made abundantly clear you guys want that too! We’ve gained hundreds of thousands of subscribers, scooped up a bunch of awards and are blessed with a community of enthusiastic people willing to share their stories and experiences. But did you know that each episode takes between 40 and 50 hours of work to make? Yea, these amazing visuals and carefully written scripts are being made by a team of full-time professionals so I think you can tell where we’re going here…. We’re starting a Patreon! Now, before you groan we of all people know how important your hard earned dollars are and we have given our perks a lot of thought to make it worth your while. That’s right! We’re going to be inviting you backstage for an intimate look behind the scenes, a new space to chat together as a community and even the chance to digitally hang out with us on a monthly basis. Also as a special limited time offer, we’ll be providing everyone who contributes, in the next two weeks, a special budget template; personally designed by us to help you create your ideal budget from top to bottom. We hope that this show has provided you value and you’ll consider joining us in our mission to change the world’s relationship to their money through education. It’s a big vision and we can’t do it without you. Where did you learn about money? From your school? Your parents? YouTube? Let us know in the comments!

100 Comments

  1. I am 45 and in community college for business management.
    In my first semester as a free elective, I took personal money management.
    I did not realize just how enough with finances I was until I took this course.

    My wife read my textbook and we took the tools in the textbook to strengthen our financial status.

    Now this is just my opinion.
    But I think that personal finance should be a high school course. Because it just one semester of learning about my finances help me to improve everything drastically. And we do this for the high school kids.
    Perhaps there won't be so much debt among young people and our country is a whole could become more financially stable.

  2. I learned from two great resources initially it was my mother who taught me the basics after was my high school teacher (not actually supposed to teach it) taught me real estate investing and how to play with a Roth 401k investment after was the pleasure of working in a bank and learning from my customers personal finance.

  3. You are right about financial literary however nobody asked me anything. I do operate on a budget, I do have money for emergencies, and I dont have any debt in collections.

  4. I feel like I'm from a different planet. Back in the 1950's my parents, uncles & aunts [all grew up in the Great Depression] forced us kids to track our expenses as kids and toddlers. And then every 2 weeks when our father's got paid, we sat down around the dining room tables with check book open to discuss distribution of money and budgeting. Then in school we kids bought these red stamps that went into a book that went to buy US gov't bonds. We were also given a white book that we'd take to a bank so that the change could be placed into our savings acct. For crying out I remember being forced to memorize the compound interest formula in 1st grade. In addition to this, all of our fathers worked in the mills and factories, and about every 2 years, they were on strike. So all of the adults in my family created a 2nd job for income [my Dad fixed up old run down shakes and then flipped them]. Then during hunting season, we all went hunting for wild game and us kids were also taught to forge for wild food. By the mid-60's when we were teenagers, most of us stopped this. But when I got older, I went back to these old habits like several of my other cousins.

  5. You lost me at "a child's RIGHT to quality financial education". It's extremely important but not a right.

  6. Great video. Yes I agree with Chris' comment below. It is insane that this type of information is not taught in schools.

  7. Teaching my kids about finance is MY job.

    I took those kinds of classes in high school and college. They taught formulas and abstract concepts. Sure, those things were valuable, but they didn't teach me life lessons. The life lessons came from my parents and family.

  8. You are wrong. There is no proper family unit to educate the young in USA which has led to current results.
    Americans, two generations ago have had high savings culture.
    Come to any South East Asia, India or East Asia : middle class are taught to get an undergraduate degree and a home first .Normally , at least 30% of their income are saved or invested every month.
    Moreover, they do not abandon their parents like you.

  9. Patreon censors and actively fights against free speech – sorry – I cancelled my account last year
    you might consider an alternative

  10. Reading below doesn't make me feel bad.

    My financial education was watching the lack of a major budget at home and my grandparents telling me to save while discouraging me to work. I still hear my grandfather telling me when I wanted to save my pennies, nickels, and dimes as well as when I went to hunt for my first job telling me it was hard and giving me the impression it wasn't worth it.

  11. My moms been living paycheck to paycheck for most of my life, so ive been looking for other ways to understand money and build my finacial literacy. I mainly go on youtube and watch the finacial diet. But i also ask adults that i know who understand money and it really helps to have peoplw there that you can trust to talk about finances and not feel judged

  12. I learned via the school of hard knocks. Looking to continue financial literacy education formally this fall; CFP at a conventional institution. Any recommendations?

  13. Hello 2 cents! I’m a huge fan. I was wondering if you guys could do a video on what to consider when thinking about relocating and working in a different city/country….

  14. Just wow the best power couple on YouTube telling it like it is!! Ps please post pics with the baby. ???

  15. I live in Alabama. My financial literacy class lasted one day and my teacher told us to pick a city where we wanted to live, see how much money the average person makes a year and build a budget off of that. She also told us to get a credit card.

  16. Thank you Two Cents, I learned about money while taking a Dave Ramsey class. I love your Youtube channel, thank you for all your team does.

  17. There is something that's very hard about trying to share this information with people you see making all the wrong decisions. It turns out that most people isn't really interested unless you are offering a 'get rich quick' scheme, no wonder those guys are so successful. Any advice on bringing this info to people I care about? Most of them don't speak English so it's hard to just share the video.

  18. I started by listening (and watching) Dave Ramsey, but I found that there were parts of his program that did not make sense to me. Later, I started watching the Financial Diet and One Big Happy Life, and eventually this show. They tend to make more sense to me because they talk about the importance of investing when you're young. Had I done that instead of trying to (admittedly halfheartedly) follow the Baby Steps, I would have a much bigger nest egg than I have now and still be paying extra on my debts.

  19. My parents grew up dirt poor so they taught me a lot. They always… ALWAYS talked about money and it was infuriating sometimes.   I think the best thing I did was play city building video games where I had to balance spending and earning in order to expand my influence over ancient Rome and Egypt. But also real time strategy games too like StarCraft, Warcraft, Empire Earth, etc.

  20. I learned about personal finances through free workshops and classes at my church. The introduction helped me and I'm very grateful.

  21. The problem is that Banks and the financial industry lobby the government for them NOT to teach people about Finance.

  22. The teachers themselves don't know about financial education, so don't take financial advice from broke people.

  23. I took an absolutely useless AP calculus class that I barely passed and don’t remember anything from instead of personal finance because the counselor would categorize that class as something for dumb kids. My little brother went through the same thing I made sure to guide him because my parents and older brothers are terrible with their finances.
    I learned it all from YouTube so you guys should get paid for your hard work

  24. It's almost like there's an incentive to make sure unsuspecting 18 year-olds go out into the world with no financial knowledge…hmm…

  25. I took financial literacy as an elective and economics last year in high school so I don't see how the education system is that bad. We had plenty of options to take financial stuff but one thing we have to remember as Americans is that frivolous spending on a whim is what makes the economy go round. When ever a recession happens and spending drops then businesses lay people off which is bad for the economy. So while it may not be wise to spend 50% of your paycheck on a house, then lease a new car every 3 years and buy everything else on installments, this poor planing also makes the economy better (except when the debt bubbles catch up to people like in 2008)

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  27. Funny enough I did take economics in high school which gave me a very basic understanding. Most of my knowledge as a young adult came from watching my mother epic fail in all her financial decisions and doing the opposite of what she did. Negative feedback loop annihilated ??

  28. I hold the time I spent working at a bank very dearly. It opened my eyes to a lot of the shady practices that these institutions use to indebt people so they can keep ahold of them. Because of that, I consider myself a financially responsible person and everybody around me agrees with me (no debt, no cc no student loans) 🙂

  29. We had half of our 10th grade year dedicated to “health” and the other half to “personal finance”. For personal finance my teacher only showed us Dave Ramsey DVDs… I am from Missouri….

    It got me to want to save up but that’s about it.

  30. As a nowegian student i can tell you that I got little to no education on finances in elementary school, and very little in middle school, probably the reason holmlia is such a shithole

  31. ????so it is parents responsibility to teach financials to their children, but parents can't guide their children it the rest of their education and correct them. Parents can't say anything to avoid children's misguidance in life specially with the gender identity punched by the liberal government.
    ???????

  32. I was required to take a financial literacy class to graduate in Oklahoma, which is surprising when you consider that we have the 49th worst public education system in the United States. ?

  33. Scientifically dubious. Dramatic presentation. Little empirical support. I bet the production team doesn't know that the link between financial education and financial literacy has been scientifically challenged. There's very limited evidence that financial education actually yields long-term gains in financial literacy. Yet, flashy videos like this continue to misinform and mislead the public.

  34. Sweden, right. Like Denmark interest rate gone negative. Despite a financially literate population is no match for fuckwit Keynesian central bankers.

  35. Im living at home so I basically dont spend any money I save and invest between 80 to 90 percent of my income but if I had to pay rent bills food I wouldn't have shit left

  36. I learn everyday about money.first from my parents and now the internet . I realize it takes hours to years to make. But only a sencond to spend it.

  37. Its not just anglo-americans, but anglo-westerners, broadly speaking who are failing in economic mathematics, specifically financial mathematics.

    Not sure about the other side of the capitalist west, the european-west. Its centre-right versus centre-left at the core of this video

  38. I feel contempt at how this issue is solely related to literacy. Your situational through out life hase more impact than any in-depth financial literacy. Its proven that your situation can cause you to make bad choices. Rent or food.

  39. I am a finance student I have been teaching my siblings (7) and parents about personal finance. Some of my younger siblings have even shown a great interest in following in my footsteps.

  40. You only need basic maths knowledge to understand personal finance. Just learn maths, learn to respect knowledge and work hard should help.

  41. You should do a video that shows the importance of long term compounding and how the average investor can achieve it through low cost index funds that tracks the S&P 500. You could also talk about putting it in a Roth IRA for bonus points.

  42. Sorry to tell you but we do not get thought exonomics in school here in sweden. Only certain highschool programmes teach it.

  43. I’m from Mexico and I first read a book called “Pequeño cerdo capitalista" (Little capitalist pig) from Sofía Macías, where I learned the basics of personal finance, after that I read other books, I searched the internet and youtube, where I found your channel, which I think is excellent.

  44. Simple: The financial education suffers because the government wants it to be so. The government enslaves people by keeping them in debt.

  45. I learned about personal finance through extensive research on the internet, mostly blogs (thanks Mr. Money Moustache!) but unfortunately only after I made a ton of mistakes and got into debt. Thanks for your YouTube channel! One of my favourites!

  46. You know how I learned about financial decisions? I left the house at 18 and never went back. I had to figure out all those things and the internet was a big help for some things I needed a little help with. My school layer down a little bit of a foundation and I had a bank account since I was 3 (obviously my parents did it but it was there) but really the rest was being forced to learn how to manage money.

    I went to college for a semester and had some major disappointments with my choice in school and left after that first semester. I didnt want to move back home so I came home for a month and found an room to share in an apartment and headed back out with $2000 that I had saved up while I was in college and had decided to leave. I finally got a job at the last minute and have been on my own ever since. Kinda. My fiance and I started living together while we shared apartments with roommates before we bought our house when we were 24/25. We used the internet to figure that stuff out too. The internet has definitely been the best tool.

  47. Come on folks…the government & school system doesn't want kids to learn personal finance. Why, you ask? Because with this knowledge comes wealthy citizens. Wealthy citizens don't need dependence on the government. The government hates this idea…

  48. Try living on 900 a month! Maybe then u will wake up and pinch pennies! I do! I have and own more then most who make 3 times that amount. It's called saving

  49. The only financial thing I remember in school was them telling us how to fill out a check, which is super useful in real life…

  50. The background sound effects are ANNOYING. Ditch the sounds, or, at least, minimize them. It's like a laugh track. Otherwise, okay.

  51. Where did I learn about money? Who says I learned?!?
    My parents never talked directly about their investments or debts, other than to say, you shouldn't be in debt. Not much help.
    My wife and I lived our life without huge debt (other than a house loan), but absolutely no investments (other than a checking account). When my father got very ill in 2013 (I was already in my 50's), I met his financial advisor and found out what money he and my mother actually had. He died the next year, and most of those investments go to pay for my mothers healthcare (she lives in a memory care unit).

    It wasn't until this time that we started working with the financial advisor, at first just taking out money each month for a mutual fund, but then adding more to stocks and bonds and getting more aggressive with our investments. Because we had no debt and essentially pay cash for everything, we had more money saved than we realized, but it was sitting in very low interest bank accounts. Overall, we're in it for the long term… market fluctuations don't interest us much (get it… "interest"), as we know investments tend to go up as time goes by.

    I work with people far younger than me, and I am always pushing them to invest early on and not go through what we must. This concerns me so much that I've added some finance videos to my channel (which is really about us looking for an RV for retirement!). It all began because we were looking at loans for the RV (it's insane how much those cost! https://www.youtube.com/watch?v=y7ekF_kgIP0&t=1s). It is quite humbling to realize how much you don't know when researching finances!

    Great channel and great information! I subscribed!

    Be seeing you!

  52. My dad was a lousy example of investing money. He gambled on sports, bought individual stocks, panic sold at the crashes, and made poor real estate choices. We stayed in a terrible house too long and he sold a nice house he should have held onto 10 more years. He never gave me good investment advice and never told me that mortgages pay the interest first, for example. But by informing ourselves, we are debt free, paid off appreciating dream house, millions in indexed funds, and pensions when we retire.

  53. this was all set up.
    financial illiteracy guarantees repeat business for the corporations and remember US economy is based on consumption.
    So if people were financially literate it would devastate corporation bottom lines.

  54. Here is my 2 Cents. While NJ does have the financial literacy requirement in my school district, it's an online course and the students quickly flip through the online course just to complete and finish as a requirement for Graduation. While it great to even have a course poor funding and lack of resources means that students don't have a live teacher teaching and there is conversations or real life demonstrations of lessons. So the course is just a waste as it does not provide the education that is intended.

  55. Over here very basic financial litercy is mandatory in school. It is not enough but at least pupils get to know what a subscription is, what package deals means, Interest, inflation etc.

  56. Governments all over the world have one rule….. Keep the population stupid…….. And people are….. Absolutely dumb.

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  58. THE PEOPLE IN CHARGE PRE-PLANNED THIS LONG AGO IT'S NOT HARD TO FIGURE OUT. THEY STRATEGICALLY DESIGNED THE SYSTEM SO THE AVERAGE PERSON HAS NO FINANCIAL LITERACY, THEREFORE MAKING THESE PEOPLE EASIER TO MANIPULATE AND CONTROL… IT'S SIMPLE…

  59. …One of the reasons why home economics isn't such a big thing in the US might also be that, at least here in Sweden, we are taught (among many other things) the importance of unions and why stores like walmart (specifically named in the class I had) are bad for people in the long run (for those interested, a very abridged version of the lesson was that it basically pushes down prices for the consumer, yes, but it also ensures that people's incomes stagnates, effectively lowering the average consumer's purchasing power.*) during this time.

    *To elaborate, the reason stores like Walmart can have such prices is partly because they give their own employees starvation wages, but also because they by now have such influence that they can make or break many smaller enterprises. I remember in this lesson we got to see an interview of the previous owner of a factory that produced vacuum cleaners. They were specifically told by Walmart that they needed to lower the cost of their products, again and again. Which they felt forced to do no matter what as they would otherwise lose almost all their customer base. In so doing, they too had to start paying their employees starvation wages (and the extra profit that would normally occur from this? Gobbled up by Walmart. And these same employees would likely also then be forced to make their purchases for the cheapest prices, namely walmart). Eventually they couldn't anymore, Walmart canceled the deal with them, and they had to close down shop. With their employees loosing their source of income after already having been paid starvation wages after a long time.

    Money doesn't grow on trees, there is a fixed amount in the system. And as companies like Walmart hoards all the more wealth why continuously offering lower prices, it means that they are effectively tightening a snare as the people around them grow poorer. Other businesses that can't compete have to close leading to less competition and a lot of people without a real income. Even those who do survive only do so by also paying their employees starvation wages. All forcing these low income earners to seek out Walmart again. And at one point or another, they will not have a choice even after they have realized this trap as they can't afford anything else.

  60. I’m 16 and I stumbled upon your channel on accident. It has been so helpful and educational for me, I feel a lot more confident now that I’m looking into college and my future after high school.

  61. Congrats on your success. I have been binging this pretty hard lately. I am 31 and had to take an online personal finance class to understand and care about my finances. I have been able to help teach my parents some good stuff too.

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