Americans Need More Financial Literacy
Americans are increasingly financially illiterate, according to a recent panel of experts cited by FA magazine. Changing the type of financial education already being delivered could help people better save for retirement — and lead to more fulfilling lives, the experts say.
Americans are misinformed about the credit system, Lauren Willis, a professor of law and author of the book "The Financial Education Fallacy," said at a panel held at the Washington, D.C.-based Newseum Institute this week, FA writes. Consumers believe the price of credit is determined by the lender’s cost and the borrower’s risk, while in reality consumers get charged what the lenders think they can get away with, she said, according to the publication. This lack of financial literacy leads consumers to miss out on comparison-shopping for credit, according to Willis, FA writes.
Americans are also misinformed about other important aspects of their financial lives. Bloomberg’s audience, for example, is seeking answers on how to save for retirement and afford their children’s college education, Peggy Collins, a co-host of Bloomberg Finance, said, according to FA. But they may be asking the wrong questions — and getting the wrong answers in response, according to Michelle Singletary, author of the “The Color of Money” column for the Washington Post, FA writes. Instead of showing people how to save for retirement, Singletary says she tries to get them to understand why they save for it, according to the publication.
“Once you know why to do it there are resources that will show you how,” she said, according to FA. On the other hand, people can’t simply rely on “some online tool to watch their money,” according to Singletary. The reason people go broke is not because of a lack of access to technology, but their desire to buy more because they don’t think they have enough, she said, according to FA.
A “prolonged consumerist culture” not only wreaks havoc on personal finances, according to panelist Susan Linn, a psychiatry lecturer at Harvard Medical School, the publication writes. If consumers don’t restrain themselves, “we won’t have an Earth,” she said, according to FA.
“It’s not about money (or at least it’s not just about money),” Linn said, according to the publication. “It’s about providing opportunities for [children] to engage in a world in a way that values nature, that values relationships, that values the ineffable splendors of life that you can’t buy.”