Thanks for the very interesting and thoughtful article. I’ve been involved in a couple of non-profits which are focused on financial literacy (and other education in the case of one of these) and offer the following thoughts:
- it’s great that W&M is contributing to improved financial literacy among university students, and we can hope it is successful in giving participants skills that will be useful over a lifetime. However high school (or even junior high) students are an equally important audience: they are spending (and mis-spending) money and developing habits and practices that may set a standard for later life; they may not go to college at all; and those that do pursue further education are making decisions about which college to attend, and how to finance it, before they actually get to college
- I agree with your points about there being differences in the level of financial literacy based on socioeconomic strata. A related point, is that lower strata are specifically targeted by companies exploiting both a lack of knowledge and an absence of apparent alternatives - think high fee banking, check cashing services, payday loans, rent to own structures etc. Improved financial literacy would go a long way to allowing consumers to avoid these exploitative businesses
- I also agree that much of the population misinterprets financial data, including (as you cited) current unemployment and inflation rates. However to most consumers, the latest monthly / quarterly / whatever period inflation rates aren’t all that relevant when they are paying 25% more for food, 40% more on a floating mortgage etc than they were a year or two ago. Short term reductions in the rate of inflation don’t ameliorate the significant price increases we’ve seen over the past couple of years. And as a related point, I think even financial sophisticates misinterpret financial statistics - in particular, concluding that an economy is healthy by relying on selected stats, but not factoring in the underlying, increasingly structural, and ultimately unsustainable deficit spending that contributes to the apparently favorable stats
Thanks again for the article, and even more so for the contribution to financial literacy!
Professor Tack,
Thanks for the very interesting and thoughtful article. I’ve been involved in a couple of non-profits which are focused on financial literacy (and other education in the case of one of these) and offer the following thoughts:
- it’s great that W&M is contributing to improved financial literacy among university students, and we can hope it is successful in giving participants skills that will be useful over a lifetime. However high school (or even junior high) students are an equally important audience: they are spending (and mis-spending) money and developing habits and practices that may set a standard for later life; they may not go to college at all; and those that do pursue further education are making decisions about which college to attend, and how to finance it, before they actually get to college
- I agree with your points about there being differences in the level of financial literacy based on socioeconomic strata. A related point, is that lower strata are specifically targeted by companies exploiting both a lack of knowledge and an absence of apparent alternatives - think high fee banking, check cashing services, payday loans, rent to own structures etc. Improved financial literacy would go a long way to allowing consumers to avoid these exploitative businesses
- I also agree that much of the population misinterprets financial data, including (as you cited) current unemployment and inflation rates. However to most consumers, the latest monthly / quarterly / whatever period inflation rates aren’t all that relevant when they are paying 25% more for food, 40% more on a floating mortgage etc than they were a year or two ago. Short term reductions in the rate of inflation don’t ameliorate the significant price increases we’ve seen over the past couple of years. And as a related point, I think even financial sophisticates misinterpret financial statistics - in particular, concluding that an economy is healthy by relying on selected stats, but not factoring in the underlying, increasingly structural, and ultimately unsustainable deficit spending that contributes to the apparently favorable stats
Thanks again for the article, and even more so for the contribution to financial literacy!
Craig,
As the outgoing FLP coordinator, I appreciate the comments. Really insightful!