If the federal government get its way, Americans may soon be required to take financial literacy courses in college. The Financial Literacy and Education Commission, chaired by U.S. Treasury Secretary Steven Mnuchin, released a report recommending strengthening the financial training Americans receive, even suggesting “mandatory financial literacy courses.”
The report also suggested providing those needing to improve their financial literacy with actionable financial information. “A body of evidence indicates that financial education alone has had a small impact on financial behaviors, in part because financial knowledge decays within two years of the lesson,” the report noted. “Behaviorally based strategies,” for example providing Social Security benefit estimates to individuals near retirement age, instead of arbitrarily providing that information, tends to be more helpful for individuals.
For advisors used to educating their clients, the government’s findings may be reaffirming. Advisor-focused vendors, such as TD Ameritrade Institutional, have also been focused on financial literacy as of late. The winner of TDAI’s inaugural fintech competition, for example, was a financial literacy app conceived by a reading teacher.
The report includes a note reassessing how financial health is measured. Stating that income is often used as a proxy for financial health, the commission presents the idea of looking at net worth to evaluate financial health—by evaluating both assets and liabilities. It concludes with a list of recommendations, including providing consumers with information on how and when to locate information for financial decision-making, helping them to interpret that data and providing them with the skills and confidence to take action.