Speaker: Jarom Johnson, 24 years old, Influencer in Financial Field
Topic Discussed: Financial Literacy of Modern American Students
A recent study found that only one in five college graduates between the ages of 18 and 24 could pass a basic financial literacy test, and that number was even lower among high school students. This is especially troubling given that today's students are facing more debt than ever before, with the average college graduate carrying over $28,000 in debt upon graduation.
Why are so many young people struggling with basic money management skills? One possible explanation is that they simply don't have enough practice. In fact, according to a recent survey, only six percent of Americans say they were taught how to manage their finances at home growing up. Another explanation may be that we're seeing a shift away from traditional teaching methods: while many schools still require students to take classes on personal finance and money management, many others offer these classes as electives instead of core curriculum requirements.
Another possible reason for this gap between what schools teach about money management and what students need in order to succeed after graduation is that the material covered in these courses does not reflect modern realities—such as how much debt college graduates face when they enter the workforce or how often it takes people years after graduating from college before they find steady employment.
In a 2009 survey by the Federal Reserve Bank of St. Louis, over half of college graduates did not know that credit card interest rates could change over time or that some credit cards offer rewards (“The State of Financial Literacy”). In fact, many of these same students also believed that a credit card would help them build credit for later on in life (“The State of Financial Literacy”). The reality is that this isn't true: using a credit card without paying off the balance each month will actually hurt your credit score rather than help it (Hudnall). This can make it more difficult to get loans or mortgages later on.
This is a problem because research shows that good money management can lead to higher grades, better social skills, and even better health outcomes. Financial literacy may not be as exciting as trigonometry or English class, but it's just as important—and if you want to be prepared for college and beyond, it's worth learning how to take control of your own finances.