Elite ivy league schools, Princeton and Harvard are the latest to join the growing number of universities offering personal finance training to their students, according to the Wall Street Journal. This past April, Harvard’s economic department led its first workshop covering major personal finance topics such as debt, credit, and retirement. Similarly, Princeton had its first annual Financial Literacy day, which offered information on basic financial terms, money management and planning for the future. The growing interest in including personal finance as part of educational curriculums coincides with America’s rising inequality and massive student debt, with over $1.5 trillion owed. Our investor fraud law team applauds the greater inclusion of personal finance in university education as an excellent starting point for life long self-education. Financial literacy empowers people to make smarter decisions rather than depending on someone who may not have their best interests in mind.
Everyone should have a basic understanding of proper saving, investing, debt management, budgeting and other basic financial concepts to maintain their livelihood. However, an alarmingly high number of Americans do not have a grasp on the financial fundamentals needed to make good decisions when handling their money. In their National Capability Study, FINRA found that around two-thirds of Americans have low levels of financial literacy based on their answers in a quiz. Of the 27,564 Americans participating in the study, most were unable to correctly answer questions pertaining to everyday financial concepts. The quiz questions included calculating interest rates and risk principles meant to provide insight into American financial decision-making. Interestingly, the study found that many respondents overestimated their knowledge.
There are steep consequences to not having adequate knowledge about everyday personal finance concepts. Without financial literacy, individuals will be more likely to make poor decisions with their money and be more susceptible to ill-intentioned securities industry employees. Studies across the board suggest that a significant number of Americans do not have the finances to deal with emergencies and medical expenses. According to the Federal Reserve, 4 in 10 adults would have difficulty covering an unexpected $400 emergency expense. Even more, at least a quarter of survey respondents had to forego a needed medical procedure from not having the sufficient funds to pay the bill.