There will be a lot of focus on getting younger people to vote as this year’s presidential election draws nearer. You may bet that the political prospects will make their batters 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, some political figures encourage young Americans to understand about 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 have financial considerations. Citizens with economic knowledge are better able to make wise choices, both in their personal life and when participating in political engagement or election. Citizens may make more educated decisions at the polls when they understand the consequences of their economic decisions.
I’ve occasionally wished 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 make wealth.” Or consider this: “For every year you wait before you take your Social Security, you will increase your monthly benefit by about 8%, which is 70% more than if you start 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 often think it’s a good idea to wait until you can afford it to 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 better. Likewise, without financial education you can get yourself into a devil of a lot of problems, including loan, bad breaks, or even housing foreclosure and bankruptcy.
In 2022, 270,000 people, or about 8 percent of lease-financed home customers, were under 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 under.
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 making a sizable financial responsibility, such as purchasing a home? What are the pros and cons of investing in different supplies, whether the stock market, silver or the latest financial trend, bitcoin? People can feel as though they are missing the golden dash because of the media’s coverage of fortune-making reports. Then, eventually, the press 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 existence, and in some ways it is natural. Learning about economic and financial fundamentals at the age of 17 or 20 seems tedious in contrast to making a fortune with cryptocurrency or becoming a popular celebrity on TikTok.
Thankfully, more people are realizing how crucial training is for young people, especially in terms of financial literacy. Financial education, including principles like supply and demand, inflation, income, and fiscal policy, is becoming more and more popular.
A lessons in personal finance must be taken by high school students to graduate, and 28 states require students to take a course in finance. The only state that has no need includes Colorado, Delaware, Illinois, Maine, Massachusetts, Oklahoma, South Dakota, Vermont and Washington.
In order to identify people university graduates who have demonstrated a high level of personal finance proficiency, Arizona passed legislation to create a state seal of personal finance proficiency.
Companies like the Council for Economic Education have been fighting for public policy that instills the fifth “R” — a real-world understanding of economy and personal finance in high school students. Its FinEd50 program promotes policy changes at the state level and reports a 12-position boost since 2022 in states with specific finance requirements. That means there will be an additional 10 million high school students who will be able to study financial education.
A fair amount of understanding of our financial life is required for full membership in our official democracy. I wish I had discovered that several years ago. Luckily, more younger people are now becoming familiar with that very useful information. When more of its citizens have higher levels of financial education, the United States is in better shape.
Steven Hill served as the Center for Humane Technology’s plan producer, FairVote’s co-founder, and New America’s political reform director. He wrote this paragraph for The Fulcrum.