If They Aren’t Financially Literate, They Won’t Succeed

Each year, the Jump$tart Coalition runs an interesting survey looking at the financial literacy of high school students.  The cumulative results of these polls are startling.  According to the Coalition, “the average student who graduates from high school lacks basic skills in the management of personal financial affairs.”  In addition, “many are unable to balance a checkbook and most simply have no insight into the basic survival principles involved with earning, spending, saving and investing.” 

Recently, I was speaking with a colleague in the health communications business over dinner and she told me the following story.  She was standing behind a woman who was purchasing a raft of groceries.  She carefully unloaded her food from her cart and watched as the cashier scanned each item.  This process was taking some time, so the people behind her were getting anxious and a little annoyed.  Finally, at the $60 mark, she told the cashier that she was done.  However, her cart was filled with items she had decided not to purchase.  The store employee was not pleased and had to take more time to find someone to return the items back to the shelves.  His colleague asked him: “If she could only spend $60, why didn’t she take fewer items?  He responded: Don’t you realize she can’t add?”

Think about what we face for a moment.  One of the most popular reform prescriptions touted by many conservatives (and some liberals) is that we should be encouraging people to open Health Savings Accounts and other insurance plans.  This way, people will be more aware of what they are spending for healthcare.  Now, there are many barriers to this approach.  Most significantly, consumers don’t have a clear sense of what medical services should cost and how to find this information.

However, another important problem is that our collective financial literacy is very low.  This is one reason that the sub-prime mortgage mess has gotten so big.  Some people were signing documents with little or no understanding of what they were doing.  So, are we really ready to give more financial responsibility to those who are not equipped to handle it? 

Those advocating for “consumerism” must think about and suggest solutions to the problem of poor financial literacy. If not, the movement will collapse like a house of cards.