Financial Literacy & Capabilities
A nationwide movement for financial literacy has empowered people by teaching basic financial skills and responsible consumption habits. Even prior to the economic and financial crisis that began in 2007, personal bankruptcies in the United States were on the rise, with debt brought on by health care costs and credit cards. The bursting of the housing market bubble and the millions of job losses suffered during the recession helped fuel record numbers of home foreclosures due to unpaid mortgages.
Being financially literate is not a guarantee that someone will make prudent decisions. Behavior may not change unless there is the capacity to do so. In other words, financial literacy does not mean that an individual or a household has the capability to alter their practices, like taking out a payday loan or begin saving for college. That is why more and more educators are beginning to use the phrase “financial capability” rather than “financial literacy.” Without capabilities, in the sense meant by Nobel prize winning economist Amartya Sen, a financially literate populace may not increase savings and investment or reduce debt and risky behavior. A focus on peoples’ “capabilities” means enabling people to fully function and enjoy life. Today’s financial literacy movement is both about content knowledge and skills and about understanding the institutional conditions to sustain behavioral changes in the long run.
A national non-profit corporation, the Jump$tart Coalition for Personal Financial Literacy, has published voluntary national standards in personal finance education. Consistent with the “common core standards” movement nationwide, there are current discussions about adopting national standards in financial education and how to assess (test) content knowledge.
Meanwhile, more and more individual U.S. states, though their own departments of education, have revised their core curricular content standards to include more economics and personal finance content. A biennial survey, Survey of the States, published by the (national) Council for Economic Education, documents the status of economic, personal finance and entrepreneurship education standards in the fifty states and the District of Columbia. In 1998, only one U.S. state required that a high school course be taken in personal finance in order to graduate with a high school diploma. Between 1998 and 2014, the number stands at twenty-two.
New Jersey mandated economic and financial literacy in 2009. Specifically, the State of New Jersey amended the High School graduation requirement to include 2.5 credits of “financial, economic, business and entrepreneurial literacy” for all those entering Grade 9 in 2010.
SCEFL’s mission, in part, is to help schools and organizations empower students and citizens in the 7 specified strands in Standard 9.2, Personal Financial Literacy:
- Income and Careers
- Money Management
- Credit and Debt Management
- Planning, Saving, and Investing
- Becoming a Critical Consumer
- Civic Financial Responsibility
- Risk Management and Insurance