The Costs of Financial Illiteracy

By Ryan Chen
Picture this: you just graduated from high school. You feel secure about the future, having memorized the Pythagorean theorem and all the chemical elements in the periodic table. You’re ready for the real world! Sounds about right, right? Wrong. Now, you’re in college. You have started using your credit card to buy all your food, clothing, and other necessities. It’s now the end of the month and you look at your credit card bill. The charge is ENORMOUS, and there is no way you will be able to pay it off in time! Your credit score is damaged, late fees are pending, and interest rates are building. You ask yourself a question: How could I have used my money better to avoid all this?
In our school system today, it is a serious problem that so many students graduate having very little idea of how money works. We are taught throughout our lives to learn in school and find a profession to earn one thing: money. While we are prepared by high school for our college coursework, we are racking up debt from loans and credit cards at the same time, and when we graduate we have no clue how to overcome it. 
Unfortunately, the problem does not stop there. What happens once you’ve obtained your dream job and received your first paycheck? Of course, the most obvious answer is to spend it on living necessities, but is that really all you should do? That’s the problem—many students today struggle to manage their money after graduating. In other words, they are financially illiterate. 
The National Financial Educators Council recently surveyed over 3000 people. They asked participants to estimate how much money they believe they have lost over because they lacked information about personal finance. The results are not surprising, but they must be taken seriously. Data shows that at younger ages, the majority of people lost less than $1000 dollars. The next biggest majority came from people who lost more than $30,000, and the rest responded in between. Although the majority of the participants said that they only lost less than $1000, it should be expected that they have only lost a little money as they have only just started dipping their toes in the working world. Regardless, the amount of participants in the greater values is concerning.  The largest percentage of people to feel that they lost +$30,000 was a staggering 32.7% in the 55-64 age group. Overall, the amounts of money being lost are unacceptable.

This graph shows how many people in each age group believe that lack of financial knowledge negatively affected their overall wealth. Source:

When it comes to managing your money, there are many aspects and approaches. That is why it is important to understand these fundamentals. Financial literacy is the understanding of how money works, which includes earning, spending, saving, investing, borrowing, and protecting your money. To understand these things, you must understand concepts such as budgeting, banking, insurance, mortgages, investments, retirement planning, along with tax and estate planning. 
Several South High classes teach many of the concepts listed above. The problem is that most of those classes are electives. A notable example of these classes is Intro to Business. This course tackles checking accounts, insurance, daily life skills, banking skills, and much more. The class is fundamental in understanding money, yet only 110 students are registered for this class this year. Needless to say, not many people are taking this class, but it’s not entirely their fault. All people have many interests and they should be entitled to explore those interests through electives. However, when people have interests other than in finance, this potentially leads to the exact problems the survey participants faced. 
The best solution to this problem in our school is to implement a financial literacy requirement. As of now, there is no financial literacy requirement to graduate in New York. There is, however, a requirement for an economics credit at our school, which poses a good start to the solution. Nevertheless, there absolutely must be a requirement to take classes similar to Intro to Business to gain financial literacy before graduating. Financial literacy courses have the potential to be greatly expanded by offering a variety of approaches towards learning about money. Students having satisfactory knowledge about money when they graduate will allow them to both prevent and tackle any financial obstacles they may encounter in the future.
Our society today revolves around money. Financial illiteracy can be detrimental to a student’s future, and that is why it’s important that students gain more knowledge about money now so that they can accomplish things such as budgeting their money enough to be able to afford living necessities or retire comfortably in the future. There isn’t any reason why the significance of financial literacy should be lessened.