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Should States Require Financial Literacy Tests?

Should States Require Financial Literacy Tests?
Man with a screw loose in his head, and holding a wrench.


Two-thirds is the fraction of Americans who would not be able to pass a basic financial literacy test. Question: If you take out a $1,000 loan that has a 20 percent rate, how much will you owe a year in interest? The answer is $200, but you wouldn’t be alone if you were unsure. Again, the aforementioned fraction of Americans (two-thirds) would probably not be able to answer that because two-thirds of Americans are wobbly, at best, when it comes to calculating interest payments correctly. Not only incorrect math, but, in this study, a full third said that they had no earthly clue of the answer. Not even close. At least they were honest.

These findings come from the National Capability Study by the FINRA Foundation, which surveyed 27,564 Americans, from June through October of last year. FINRA is a quasi-governmental organization that regulates brokers and Wall Street.

Although many predicted that a silver-lining of the 2008 financial crisis would be that it would teach many Americans a lesson in financial literacy. Apparently, most Americans accidentally fell asleep during that lesson and woke up just in time to make it to Phys Ed.

“This research underscores the critical need for innovative strategies to equip consumers with the tools and education required to effectively manage their financial lives,” said FINRA Foundation Chairman Richard Ketchum in a press release. “My hope is that policymakers, researchers and advocates will use these findings to make more informed decisions about how to best reach underserved populations.”

What do we expect?

Currently, only four states — Missouri, Tennessee, Utah and Virginia — require that high school students take a stand-alone personal finance course to graduate, according to Jump$tart Coalition, which is made up of 150 financial institutions. The Council on Economic Education made the estimate that only 17 states require high school students to take courses that even include personal finance instruction.

What is worse, very few millennials are saving for college or other long-term goals — some because they are just plain broke, to be fair, but many because they just don’t think about it or know how to do so effectively. Many young people just don’t comprehend most of the rudimentary financial terminology. For instance, more than 75 percent of 16- to 18-year-olds say they are financially savvy, but less than 20 percent knew what a 401(k) plan was, and only 32 percent knew how credit card interest and fees worked. Less than a third of young adults had basic knowledge of interest rates, inflation and other financial terms, according to a federal study.

What is being done to help? Anything?

People are indeed fighting back and attempting to educate the country on financial matters. Advocates for reform are pressing schools to incorporate personal finance into math and language-arts classes in elementary schools. For example, California now requires the state board of education to integrate financial literacy into existing curriculums, and 20 states have legislation that does pertain to financial literacy goals and school requirements, according to a tally by the National Conference of State Legislatures.  .

States and schools have recently been leveraging some federal grant programs, including from the Department of Education, to help with financial literacy. Companies with vested interests, such as Visa, also have been pitching in to help teach financial literacy to school kids. Visa’s Practical Money Skills program, which, in partnership with the NFL, developed Financial Football, is among the most high-profile, privately produced financial literacy programs offered to states and schools.


While Americans may not be the most financially versed citizens of the world, we are trying to improve. Companies, organizations and even the government itself has been pitching in. Side note: If you happen to be somebody who wants to improve your financial literacy skills and rank amongst the one-third who can pass a basic financial literacy test, there are a bunch of resources to choose from to help you do so.


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