What You Need to Know
- The author says uneven access to financial knowledge contributes to financial equality.
- He believes no amount of point-of-sale disclosure can overcome financial illiteracy.
- He wants the financial services industry to step up and do more to promote personal finance education.
In survey after survey, Americans of all ages can’t answer basic financial questions. This lack of knowledge strikes at the heart of why Americans cannot properly manage their financial affairs and plan their financial futures.
How can a consumer decide which product to buy to protect their household financially without basic financial literacy? How can day-to-day money decisions be made? How can new fintech tools be understood and used? Will consumers hurt their future by making wrong money decisions? Can lifelong financial security be achieved? How can decisions be made on where to invest and how to save for retirement?
Where Lack of Knowledge Starts
Only 20 states require students to take a personal finance or economics course to graduate from high school. In fact, we require more education and training to get a driver’s license than we do to learn to manage personal money matters. In short, the low educational priority placed on personal finance is quite shocking. Money knowledge is essential to functioning as an adult in our fast-paced, technology-driven society.
Much is also written about income inequality in our country. In a December 2013 speech, then-President Barack Obama called income inequality the “defining challenge of our time.”
My personal belief is that financial knowledge inequality is part of the income inequality problem. A person can’t possibly make the right decisions for their financial future without a basic knowledge of personal finance. No amount of point-of-sale disclosure can overcome financial illiteracy.
The Inequality Crisis
Investopia defines income inequality as the extreme disparity of income distributions with a high concentration of income, usually in the hands of a small percentage of a population.
When income inequality occurs, there is a large gap between the wealth of one population segment and the wealth of another. There can be varying types of income disparity segregation and analysis used to understand income inequality. Overall, income inequality simply refers to the fact that different people earn different amounts of money. Understanding exactly why this happens is not as clear as you would think.