Steven Hill
As this year’s presidential election gathers steam, there’s going to be a lot of emphasis on getting young people to vote. Since 2020, about 16 million young people have come of voting age, so you can bet that the presidential candidates will make their pitches to motivate these young Americans. And organizations like Rock the Vote will try to engage young voters as well.
But, as Americans, we are more than voters. We are also economic agents who must work and manage our economic lives. That can be a challenge for many young people to learn, and unfortunately few political leaders encourage young Americans to learn about economics or become financially literate.
Yet so many political decisions have an economic component. Economically informed citizens are better equipped to make good decisions, both in their personal lives and when voting or participating in civic life. When citizens understand the consequences of their financial choices, they can make more informed decisions at the ballot box.
I have sometimes wished that when I was younger I had been taught greater financial literacy. In particular, I would have benefited from lessons like, “If you purchase a house as soon as possible, you won’t waste years of your money paying rent, but instead you will save up equity for later use.”
And “If you put your money in the stock market and leave it there for five to 10 years, you’re almost guaranteed to make money, given the historical record.” Or how about: “For every year you wait before you take your Social Security, you will increase your monthly benefit by about 8%, which amounts to 70% more if you wait until you’re 70 compared to if you start taking Social Security early at 62.”
The first two I did not learn until much later in life; when it comes to the third one, I’m always amazed at the number of friends and associates who are approaching retirement years and don’t know that waiting to start your Social Security payments is a good thing to do, if you can afford it.
What I have learned is that being financially literate at any age gives an individual the resources they need for greater security. And the sooner you know, the better it will go. Conversely, without financial literacy you can get yourself into a heck of a lot of trouble, including debt, bad credit, or even housing foreclosure and bankruptcy.
In 2022, 270,000 homeowners, or about 8% of mortgage-financed home buyers, were underwater on their mortgages, meaning they owed more on their property than it’s worth. In 2009, during the nationwide economic collapse sparked by a home mortgage crisis, nearly a quarter of the nation’s homes were underwater.
The film “The Big Short” showed how banks were handing out loans like candy, including memorable cases of mortgage lenders providing “NINJA loans” (“no income, no job, no assets”) to applicants, including an exotic dancer who owned five houses and a condo with adjustable rate mortgage loans on each.
When should you take on a huge financial commitment like buying a house? What are the pros and cons of investing in other commodities, whether the stock market, gold, or the latest financial fad, bitcoin? The media trumpets stories about fortunes being made and a person can feel like they are missing the gold rush. And then later the media downplays the tragedies of those who made the wrong investments and lost everything.
Consequently, many young people never learn the basic financial skills needed to prosper in life, and in some ways it is understandable. Compared to making a bitcoin fortune or becoming a TikTok influencer, learning about economic and financial basics when you are 17, 18, 20 years old seems boring.
Fortunately more people are realizing the importance of education around financial literacy, especially for young people. Increasingly it’s recognized that economic education can equip young adults with essential knowledge about how the economy functions, including concepts like supply and demand, inflation, wages, and fiscal policy.
Currently 35 states require high school students to take a course in personal finance to graduate, and 28 states require students to take a course in economics. The only states that have no requirement include Colorado, Delaware, Illinois, Maine, Massachusetts, Oklahoma, South Dakota, Vermont, and Washington.
Arizona enacted legislation to establish a State Seal of Personal Finance Proficiency to recognize public school graduates who have attained a high level of proficiency in personal finance.
Organizations like the Council for Economic Education have been advocating for public policy that instills in high school students the fourth “R” — a real world understanding of economics and personal finance. Its FinEd50 initiative advances policy changes at the state level and reports a 12-state increase since 2022 in states passing personal finance requirements. That translates into an additional 10 million high school students who will be able to learn financial literacy.
Full participation in our representative democracy requires a measure of understanding of our economic lives. I wished I had learned that many years ago. Fortunately, more young people are now gaining knowledge of that very practical information. The United States is better off when more of its residents have high levels of financial literacy.
Steven Hill was policy director for the Center for Humane Technology, co-founder of FairVote, and political reform director at New America.
