retirement accounts, medical savings plans, college education savings plans, and many others. To
make informed and beneficial decisions when acquiring these financial products, one must not
only be able to assess interest rates and tax costs, but also have the ability to afford the cost long-term. 40 Thus, a financially literate person should be able to make base level math and monetary
calculations, as well as effectively manage his or her personal finances. 41 Therefore, adults need
a strong foundation in basic math and personal finance skills before they can effectively teach
such skills to their children.
B. The Rising Prevalence of Financial Illiteracy
Financial illiteracy is not just a problem from years past. 42 It is very much present and
prevalent in America today. 43 Various studies demonstrate the range and form of financially
illiteracy. 44 The rise of programs and legislation targeted at improving financial literacy,
especially starting in the 2000s, demonstrates widespread recognition and growing concern about
the problem. 45 Nevertheless, as the economy has made its way out of a recession over the last
Consumers are faced with a wider and increasingly complicated array of options for managing their
personal finances and selecting investments and credit products.
Technological advances have increased the capacity for targeted marketing to consumers, potentially
increasing some consumers’ vulnerability to predatory lenders and other unscrupulous providers of
Consumers are increasingly responsible for their own retirement savings, with traditional defined-benefit
retirement plans becoming increasingly rare.
The personal saving rate has fallen dramatically, declining from nearly 7 percent of gross domestic
product in the 1970s and 1980s to around 2 percent in recent years.
Household debt as a percentage of income hovers at record high levels. In addition, bankruptcy rates have
more than quadrupled in the past 20 years.
U.S. GOV’T ACCOUNTABILI T Y OFFICE, supra note 30, at 2.
40 FINRA INVESTOR EDUC. FOUND., supra note 12, at 17.
41 See id. (evaluating financial knowledge through mathematical assessment questions); MICHAEL JUSTIN LEE, THE CHALLENGE OF
FINANCIAL NUMERACY: REQUISITE MATHEMATICAL REASONING FOR FINANCIAL LITERACY 2 (2013) (identifying functional literacy
and functional numeracy as important to financial literacy).
42 James Surowiecki, Greater Fools, NEW YORKER (Jul. 5, 2010),
http://www.newyorker.com/talk/financial/2010/07/05/100705ta_talk_surowiecki (“Financial illiteracy isn’t new, but the consequences
have become more severe, because people now have to take so much responsibility for their financial lives.”).
43 See id. (laying out some of the “startling” statistics of financial illiteracy today). The author also explains that more needs to be done
if the nation is going to truly resolve the problem of financial literacy:
Almost half of those surveyed couldn’t answer two questions about inflation and interest rates correctly, and
slightly more sophisticated topics baffle a majority of people. Many people don’t know the terms of their
mortgage or the interest rate they’re paying. And, at a time when we’re borrowing more than ever, most
Americans can’t explain what compound interest is.
44 Some of the studies cited in this Article include: PRESIDENT’S ADVISORY COUNCIL ON FIN. CAPABILITY, supra note 4; COUNCIL
FOR ECON. EDUC., supra note 12; FINRA INVESTOR EDUC. FOUND., supra note 12.
45 The first major piece of legislation was the Excellence in Economic Education Act of 2001. 20 U.S.C.A. § 7267 (West 2013).
(a) PURPOSE- The purpose of this subpart is to promote economic and financial literacy among all students
in kindergarten through grade 12 by awarding a competitive grant to a national nonprofit educational
organization that has as its primary purpose the improvement of the quality of student understanding of
personal finance and economics.
(b) OBJECTIVES- The objectives of this subpart are the following:
( 1) To increase students’ knowledge of, and achievement in, economics to enable the students to
become more productive and informed citizens.
( 2) To strengthen teachers’ understanding of, and competency in, economics to enable the teachers
to increase student mastery of economic principles and the practical application of those principles.
( 3) To encourage economic education research and development, to disseminate effective
instructional materials, and to promote replication of best practices and exemplary programs that
foster economic literacy.
( 4) To assist States in measuring the impact of education in economics.
( 5) To leverage and expand private and public support for economic education partnerships at
national, State, and local levels.