There will be a lot of focus on getting younger people to vote as the 2016 presidential election draws near. You may bet that the political prospects will make their efforts to inspire these young Americans since about 16 million young people have reached the voting age by 2020. Additionally, companies like Rock the Vote may try to entice younger citizens as well.
But, as Americans, we are more than citizens. We also have to manage and work with our financial lives because we are economic agents. However, few political figures encourage young Americans to understand finance or become financially educated. That can be a problem for some young people to learn.
But there are so many political choices that also involve economic factors. Citizens with economic knowledge are better able to make wise choices, both in their personal lives and when participating in political engagement or elections. Citizens may make better-educated decisions at the polls when they understand the consequences of their financial options.
I occasionally wish I had been taught more financial education when I was younger. 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 “given the historical record, if you put your money in the stock market and keep it there for five to ten years, you’re almost certainly going to build wealth.” Or, to put it another way, “You will increase your monthly benefit by about 8% for every year you wait before you take your Social Security,” which is 70% more than it would be if you started taking Social Security at age 62.
When it comes to the third one, I’m always amazed at how many friends and associates are approaching retirement and don’t know that, if you can afford it, you should wait until you can start receiving Social Security benefits. The first two I didn’t learn until much later in life.
Being financially educated at any age gives someone the tools they need for greater stability, I’ve learned. And the sooner you are informed, the sooner progress can be made. Likewise, without financial education, you can get yourself into a devil of a lot of problems, including bills, bad breaks, or even housing foreclosure and bankruptcy.
In 2022, 270,000 people, or about 8 percent of lease-financed home customers, were underwater on their mortgages, meaning they owed more on their home than it’s worth. In 2009, during the global economic decline sparked by a home loan crisis, almost a third of the world’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 commit to purchasing a home in the form of a sizable financial responsibility? What are the pros and cons of investing in different assets, whether the stock market, silver, or the latest financial trend, bitcoin? People can feel as though they are missing the golden rush because of the media’s coverage of fortune-making stories. Then, eventually, the internet downplays the calamities of those who made the wrong investments and ultimately lost everything.
Consequently, many young people never learn the fundamental financial knowledge needed to survive in life, and in some ways, it is natural. Learning about economic and financial fundamentals when you are 17 or 18 years old seems dull in contrast to making a cryptocurrency fortune or becoming a TikTok influencer.
Thankfully, more people are realizing the value of financial literacy learning, particularly for young people. It is becoming more and more common for young adults to learn vital information about how the business operates, including concepts like supply and demand, inflation, wages, and governmental policy.
A course in personal finance must be taken by high school students to graduate, and there are 28 states that require finance coursework. The only states that have no requirement include Colorado, Delaware, Illinois, Maine, Massachusetts, Oklahoma, South Dakota, Vermont, and Washington.
Companies like the Council for Economic Education have been advocating for legislation that instills the fifth “R” in high school students: a practical knowledge of economics and personal banking. The state-level policy changes are made through the FinEd50 program, which reports a 12-state increase in personal finance requirements since 2022. That means there will be an extra 10 million high school students who can study financial education.
Total participation in our representative democracy requires a fair amount of knowledge of how our financial lives operate. I long before wished I had discovered that. Thankfully, more young people are now becoming familiar with that very useful information. When more of its citizens have higher levels of economic education, the United States is in better shape.
Steven Hill was the Center for Humane Technology’s plan producer, FairVote’s co-founder, and New America’s political reform producer.