One potentially positive side effect of the real estate market’s crash and subsequent (ongoing) economic recession was a call to arms for promoting financial literacy among American children and adults.

Many of the “exotic” mortgage products and predatory lending strategies that allowed Americans of all income levels to overextend themselves on credit could only succeed in a culture where only those who work in the financial industry have adequate understanding of how the financial system works.

Money Smarts Lacking in the U.S.

If you’re like most Americans, you aren’t as financially savvy as you could be:

• Average scores on financial literacy tests administered to school-age children have dropped steadily over the years, with 62 percent failing in 2006.
• Surveys show that as many as 21 percent of 18- and 19-year olds have at least one credit card.
• Young adults (aged 18 – 24) spend about 30 percent of their income on repaying debt, three times the recommended 10 percent for this purpose.
• About one in five American households is “unbanked,” meaning that they do not keep their money in a standard, federally insured financial institution.
• Of households that carry revolving debt (such as credit card debt), the average amount is between $10,000 and $12,000 – and this doesn’t even take into account debt from mortgages, car loans, etc.

And, while these numbers are upsetting in themselves, they’re even more disturbing when considered in context: if almost nobody understands financial matters, who is expected to teach us?

Proposed Bill Would Fund Financial Literacy Education

While the current state of the economy means headaches for most of us, it also means our legislators are taking action to make things better.

According to a press release, Senator Kay Hagan (D – N.C.) has proposed a bill that would provide funding to states that include financial literacy educational programs for sixth to twelfth graders.

According to the release, the bill would:

• Require that 80 percent of money be funneled to student instruction
• Allow the remaining 20 percent of funds to go toward professional and curriculum development

The bill is currently beginning its path through the Health, Education, Labor and Pensions committee of the Senate – consider contacting your senator if it interests you.

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