Financial literacy and capability, what is it and why is it important?

Acknowledging the financial literacy crisis

We have a massive problem in this country and in this state.

Take a look at these statistics:

It’s clear why financial literacy and capability are important, but what does it mean to be financially literate and capable exactly? Financial literacy is the ability to understand and manage personal finances effectively. It involves understanding basic financial concepts such as budgeting, saving, investing, and managing debt. Financial capability, on the other hand, goes beyond financial literacy and includes the ability to apply that financial knowledge and those learned skills to real-life situations.

Lack of personal finance courses has a lasting effect after high school

Financial literacy and financial capability are critical skills for individuals of all ages, but they are particularly important for teenagers, especially those from historically marginalized and under-resourced communities. Financial education is essential in helping teens avoid financial pitfalls and achieve financial success. A 2023 report by Ramsey Education entitled, The Financial Literacy Crisis In America, finds that a lack of personal finance education when in high school has a lasting effect on Americans long after they graduate. Of US adults surveyed, those that took a personal finance course in high school were five times more likely to say they graduated high school fully prepared to handle money in the real world than those who didn’t. Other findings include:

  • 88% said high school did not leave them fully prepared for handling money in the real world
  • 80% said they would’ve had a better start with money if they’d learned more about personal finance in high school
  • 74% would’ve made fewer money mistakes
  • 73% would be further ahead with money
  • 76% would’ve felt less stress around money

Benefits of financial education at the right time (or early in life)

The benefits of financial education are numerous, and the impact is clear. By having a strong financial foundation, teenagers can make informed decisions about their money, avoid financial mistakes, and work towards achieving their financial goals. The FINRA Foundation found that students who had access to financial education were less likely to have late fees, make only minimum payments on their credit cards, and take out payday loans, which leads to higher credit scores. Teens who are taught money management in school gain a greater understanding of how student loans work, what level of debt is appropriate, and the importance of saving. Financial education empowers teens to take control of their finances and make sound financial decisions that will benefit them in the long run.

SecureFutures’ President and CEO, Brenda Campbell, knows all too well the urgency of getting financial education into the hands of teens. “I can’t think of a more important skill for teens than learning how to manage money and become financially capable. It’s an essential life skill that can have a significant impact on future well-being. Teens with access to financial education are more likely to make informed decisions throughout their lives, leading to greater financial stability, reduced debt, and increased savings.”

The racial wealth gap

For teenagers from historically marginalized and under-resourced communities, financial education is particularly significant. These teens often face unique challenges that make it difficult for them to achieve financial success. For example, they may not have access to the same financial services and opportunities as their peers from more privileged backgrounds. Additionally, they may lack financial role models or have negative experiences with financial institutions, making it challenging for them to build trust and confidence in the financial system.

Financial education can help level the playing field for these teens by giving them the knowledge and skills they need to navigate the financial world successfully. It can also help them understand the importance of financial planning and saving, which can help break the cycle of poverty and provide a path to financial independence. “A lack of understanding is likely to lead to challenges like overspending, debt, and poor credit scores,” explained Brenda. “For some, this could mean years of hardship. Financial education gives our kids the best possible chance at a secure future.” Learning to manage money not only helps equip teens with the tools to advocate for themselves and their communities, but it allows them to work towards creating a more just and equitable financial system as well.

Progress is being made

As of May 4, 2023, there are only 19 states that require a personal finance course to graduate high school, but the tide is turning. The number of states that guarantee a personal finance course has increased from 8 to 19 in just the last two years. You can see live updates of guarantee states on the Next Gen Personal Finance (NGPF) website. It is the NGPF teacher community’s goal that all students will take at least one semester-long course in personal finance before high school graduation by the year 2030, and the momentum is there to make that a reality. As the Ramsey Education report points out, due to renewed efforts to increase students’ access to personal finance education in high schools, like those of NGPF, younger generations are starting to take personal finance courses, with Gen Z being the most likely to have taken one.

In our own state of Wisconsin, Governor Evers is introducing a new “Do the Math” personal finance initiative allocating $2.5 million per year to help schools start or improve programs around financial literacy curriculum and innovative instruction practices. Vice President of Programs at SecureFutures, Kristen Ruhl, says the “Do the Math” initiative will be critical to increasing financial capability across the state.

“Funding is the key to ensuring equitable access to education; mandates alone won’t move the needle as far as it needs to go. While it is important that schools and districts have the flexibility to customize the curriculum to meet the needs of their community, there is no question that it is essential for every young person in Wisconsin to receive comprehensive, high-quality financial education, regardless of where they live,” said Kristen. “No student should have to miss out on this important education simply because their school can’t afford to offer it.”

By focusing more on our financial literacy and capability issues, we can increase the availability of financial education programs and tools in high school classrooms, empowering teens to establish themselves and their communities for success. To learn how SecureFutures’ is striving to provide financial education and mentorship programs for all, please visit

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