Financial Literacy and Better Capitalism

Karen Kuykendall
May 9
8 min read

Confessions of a Financial Illiterate

When I was in my 20s, my dad urged me to start investing in an IRA. He even set one up and did the initial funding for me. Unfortunately, I did not have a clue about how investing worked; to be truthful, I was afraid of the stock market. It was a mystery to me, and since I was not naturally inclined to be interested in it, I ignored it until later in my life. I very much regret doing so now and have made sure my children understand how important it is to invest in their future early on.

Though I was good at not spending more than I earned, I was in essence financially illiterate until my late 40s. I knew very little about how mortgages, insurance, and investing worked. I was clueless about the best terms for a car loan and rarely checked my credit score. My first husband was a CPA, so I figured he had the money part of our lives taken care of. This, unfortunately, turned out not to be true. Since then, I have learned from many real-life examples that a degree in finance is no guarantee of handling your own money well.

More recently, I have been with businesses that involve both insurance and lending. With almost no exceptions, the adults coming through the door do not understand how either of these areas work, what is involved, or how to choose their best option. While it is my job to help them navigate these issues and I am happy to do so, it is disheartening to see how few of them understand basic financial matters.

Financial Literacy in the US

Unless you have a parent who teaches you these crucial principles or you take a comprehensive personal finance class in high school, most people enter the world of adulthood not knowing how money matters work. For example, the average score of this short quiz offered by FINRA is 3.3/7, which on any test would be a failing grade.

The state of financial literacy among the US population is, unfortunately, reflected in those quiz results. According to the WalletHub website:

Financial literacy rates have shown a decreasing trend since 2020, reaching a peak of 52% in 2020 before dropping to 48% in 2023 and 2024.

According to the National Foundation for Credit Counseling’s 2024 Financial Literacy Survey, 47% of US adults continue to give their personal finance knowledge a grade of “C” or worse, an increase of approximately 12% from results of the same survey in 2009.

It’s therefore no surprise that consumers are still displaying flawed financial logic. For example, after cutting back on spending in reaction to the economic woes of the Great Recession, US consumers have begun to incur credit card debt at an alarmingly rapid and consistent rate. We managed to increase our credit card debt in 2024 by 13.53% when compared with 2010, according to WalletHub’s Credit Card Debt Study.

In 2023, the National Financial Educators Council surveyed people to determine the costs associated with a lack of knowledge about personal finance. It was discovered that 8.83% of Americans said the cost of not being financially literate was more than $10,000.

Financial Literacy 101

If financial literacy is more than keeping within your budget, what does it entail? Financial literacy extends to understanding the broader financial landscape. It includes recognizing the implications of interest rates on loans, the significance of credit scores, and the impact of inflation on savings. A financially literate individual is equipped to navigate complex financial products and services, enabling them to make choices that align with their long-term goals. The areas of financial literacy include:

Income

First and foremost, there is income from traditional employment, freelance work, investments, rental properties, and/or passive income streams. Understanding of one’s worth in the job market and negotiating salary is a vital skill that can significantly impact financial well-being. Additional income opportunities--such as side jobs that align with your interests and skills--can also enhance financial stability and growth.

Spending

Developing healthy spending habits, creating budgets, and diligently tracking expenses are essential components for managing finances effectively. Establishing these practices not only helps individuals maintain control over their financial situation but also empowers them to make informed decisions regarding their money.

Saving

Understanding the importance of saving for both short-term and long-term goals, such as future purchases, emergencies, education, and retirement, is crucial for financial stability and personal growth. The practice of saving for both short-term and long-term goals, along with building a robust emergency fund and allocating funds for future needs, forms the basis of sound financial management.

Borrowing

Loans can vary significantly in their structure, interest rates, repayment schedules, and overall costs, depending on the lender and the specific type of loan. Understanding the terms of different types of loans is crucial for anyone considering borrowing money, as it helps individuals make informed financial decisions.

Investing

Learning about different investment options is crucial for anyone looking to build and grow their wealth effectively. A clear grasp of risk and return dynamics, understanding of taxes and fees, and a solid long-term investment strategy are all integral components of a successful wealth-building journey.

Protecting

Safeguarding assets is a vital component of maintaining financial stability. Understanding the importance of insurance can ensure that a person is financially protected in case of accidents, natural disasters, or health emergencies. Additionally, taking proactive measures to prevent fraud and identity theft is equally critical in achieving financial security.

Connection to Better Capitalism

Economic mutuality isn't solely dependent on the ethical behavior of leaders and employers. Individuals must also be empowered with the knowledge and skills necessary to make informed financial decisions. In our capitalist economy, where markets are driven by supply and demand, the ability of consumers and investors to understand financial concepts is crucial for the effective functioning of the system.

When consumers are financially literate, they can evaluate products and services critically, making decisions that not only benefit themselves but also encourage businesses to innovate and improve. Similarly, investors who understand financial principles are more likely to make sound investment choices, contributing to the overall growth and stability of the economy.

Individuals who are knowledgeable about financial matters are more likely to engage in the economy, whether through entrepreneurship, investing in the stock market, or making informed purchasing decisions. This kind of participation fosters competition, drives economic growth, and leads to a more equitable distribution of wealth, as individuals can better manage their finances and seize opportunities for advancement.

Financial literacy also reduces financial risks for both individuals and the economy as a whole. Individuals who understand the implications of debt, for example, are less likely to engage in reckless borrowing that can lead to personal financial crises. On a larger scale, widespread financial literacy can contribute to a more stable economy, as consumers and businesses alike make decisions that are informed by a clear understanding of financial risks and rewards.

Finally, financial literacy is fundamental for supporting sustainable economic growth. As individuals become more adept at managing their finances, they are more likely to save and invest, which in turn fuels capital formation and economic expansion. A financially literate populace can also adapt to changing economic conditions, making it easier for economies to weather financial downturns and emerge stronger.

Education Resources

As of 2025, unfortunately only 27 states require a stand-alone personal finance course for high school students; see what your state requires at this link from Dave Ramsey. Fortunately, there are many resources both for young people and adults, either through community resources or through one of the following online options:

Federal Programs

Consumer Financial Protection Bureau’s Office of Financial Education: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 called for the creation of the Consumer Financial Protection Bureau (CFPB) in order to consolidate many of the watchdog duties that were previously the domain of a number of different federal bodies. Not only does the CFPB work to prevent anti-consumer business activity, but it also helps educate consumers on myriad personal finance topics through its office of Financial Education
MyMoney.gov: This is the federal government’s website for personal finance education. It has various personal finance resources and tools, including teaching curricula for parents and teachers.
Consumer.ftc.gov: FDIC website offers a program to help those outside the regular financial system boost their money skills. They provide easy-to-follow courses in multiple languages to enhance financial literacy.
Consumer.gov: The FTC website provides free resources covering credit, debt, identity theft prevention, and scam avoidance. It also offers guidance on budgeting, banking, prepaid cards, and general money management.
Money Smart: The Federal Deposit Insurance Corporation website hosts a financial education program tailored to individuals outside the traditional financial system. Their curated curriculums aim to improve financial skills, with many resources offered in Spanish and other languages.
Social Security Administration's People Like Me: The website offers information and tools for people of all ages. Users can create a my Social Security account to access personalized tools like estimating future benefits and managing current ones.
Volunteer Income Tax Assistance and Tax Counseling for the Elderly: The IRS's VITA and TCE programs provide free tax preparation help. VITA assists those earning $60,000 or less, persons with disabilities, and limited English speakers. TCE specializes in seniors aged 60 and older, focusing on pension and retirement questions. Services are available in multiple languages.
USA.gov: This website offers various resources and links to information sourced from numerous federal government agencies.

Private Organizations

State Farm Financial Literacy Lab: A large donation from the State Farm to Florida International University allowed the school to build this research and teaching facility.
Practical Money Skills: This Visa-run website is home to comprehensive financial literacy resources and teaching tools, including the popular game Financial Football, which has gotten a good deal of exposure thanks to the involvement of the National Football League, one of Visa’s corporate partners, and many of its celebrity athletes.
Financial Literacy Center: A joint venture from the RAND Corporation, Dartmouth College, and the Wharton School of Business at the University of Pennsylvania, the Financial Literacy Center develops and tests programs to improve financial literacy in the United States.
National Foundation for Credit Counseling: Aside from conducting well-publicized surveys that gauge the state of personal finance in the US, the NFCC strives to create a national culture of financial responsibility through its nationwide counseling efforts.
Jump$tart Coalition for Personal Financial Literacy: This Washington, D.C.-based non-profit coalition of 150 national organizations seeks to advance financial literacy among young people from Pre-K all the way through college. Central to this effort are events like Financial Literacy Day on Capitol Hill.
Operation Hope Operation Hope, founded in 1992, empowers underserved communities through education and financial resources, fostering independence and offering programs in credit management, small business development, and financial literacy.
Money Think: MoneyThink, founded in 2008 by college students, provides nationwide financial coaching to students. Through mentorship programs led by trained college students, they emphasize essential financial skills for high school and college freshmen, supported by resources from various institutions.
Clearpoint: Clearpoint, affiliated with Money Management International, aids individuals in pinpointing the roots of their financial worries and devising actionable plans to tackle them. Their comprehensive credit counseling approach focuses on educating individuals on budgeting, credit management, goal setting, debt prioritization, and sound financial decision-making.

Next Steps

We all need to do what we can to create a more financially savvy citizenship. If your state does not require a finance course before high school graduation, consider talking to your local school board and/or state representatives about developing such a class. If you encounter someone who needs financial education, refer them to the list of free resources above. If you are really interested in helping people on an individual basis, consider becoming a financial coach; look at courses offered through Ramsey Solutions or the National Financial Educators Council.

Financial literacy is essential to personal empowerment and economic stability, and essential for economic mutuality. As society continues to evolve in the face of economic challenges, the significance of financial literacy will only grow. Whether we advocate for education in our schools, assist others in their financial journey, or further educate ourselves, our contribution to making a more financially literate nation will help to make better capitalism a reality.

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