The Need for Financial Literacy

One day in the not so far-off future, you’re going to have your own salary. You’re going to live on your own and perhaps buy your own house someday. You’ll have to keep a budget, invest for the future, and save for retirement. But do you know how you’d go about managing your money?

If you have no answer, don’t worry — the rest of the country doesn’t know, either. A 2010 national survey by the Financial Industry Regulatory Authority revealed that in the year before the survey was conducted, 20 percent of American households spent more than their incomes and a staggering 60 percent of Americans do not have a rainy day fund for emergencies. FINRA also reported that survey respondents could correctly answer only three out of five financial literacy questions. In the wake of these data, David Nelms, CEO of credit card company Discover, has argued for a public- and private-sector effort to help children become financially literate.

While it’s clear that Americans need to understand how to better manage their finances, I’m not going to focus on the national financial literacy gap. Instead, I’ll examine what Brown students can do to better understand how to go about budgeting and saving their money for the future. This isn’t to say that Brown students are financially illiterate. Rather, everyone is susceptible to financial mistakes. Let’s not forget how the subprime mortgage crisis brought down the economy.

Currently, four states — Utah, Missouri, Tennessee, and Virginia — require that high school students take a one-semester personal finance class. Twenty other states require that personal finance material be weaved into material in other courses. Of course, it would be antithetical to the New Curriculum for Brown to require each student to take a personal finance class, nor do I think such a class is necessary.

Each year, Brown should host a short and fun personal finance seminar for graduating seniors on the cusp of entering the fabled “real world.” Between its students and its economics professors, Brown already has the resources to teach personal finance to its students who are unfamiliar with the topic. An economics professor who could clearly and concisely explain the differences between certain types of investments would be an ideal candidate to lead the seminar. Additionally, the Brown Investment Group has experience in managing a diverse portfolio of stocks and could send a student representative to impart her knowledge to seniors who are about to make their own money.

Once you’ve learned how to spend and invest your money wisely, you’ll be better off. You’ll know how to weather short financial storms and have enough money saved up for retirement.

But you’re not the only one who will be better off. So will anyone else with whom you share your newfound financial knowledge. If you teach them correctly, your friends and, much later, your children will be financially literate. Preventing another subprime mortgage crisis starts at a small level: with you.


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About the author

Olivia Conetta is a co-editor-in-chief at The Spectator. She is majoring in public policy and economics and hails from Roslyn, New York.

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