Financial Illiteracy, Still Keeping Americans Poor

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Given our economy, I’m with those who believe we owe our kids a thorough grounding in economics, both in elementary and high school. My kids, K and 2nd grade, make deposits in a local savings account every Wednesday, along with most other kids at the school. As I scramble around for money to tuck into their deposit envelopes Tuesday nights at midnight, I always think: Ok, this is a start. By fifth grade, maybe they’ll be on to derivatives and exactly why they can never, ever trust the government with their money. As they age (our school is new and so far just K-2), we PTA Nazis plan to involve them in our fundraising activities, making budgets, figuring out profit margins, working the cash register, making change, deciding how to spend funds, etc.

Recently, an economist attempted much the same thing; he spent time teaching financial literacy to young mothers in homeless shelters, bless his heart. He learned many discomforting things (See his diary here) but I’m with him that one thing in particular is troubling. From the Economist:

One thing that shocked me was how many women had 401(k) plans. You can withdraw some of these funds if you experience severe financial hardship or take out loans, but nearly all of the women did not want to touch their accounts. All the women have substantial credit card debt and are living in a homeless shelter, yet many have an asset they can’t access for another thirty years. This struck me as rather perverse. Should the poor really have such illiquid assets when they’re prone to these kinds of income shocks?

So what have we learned? That rich/educated folks, however well-intentioned, have a lot to learn about how poor people think. I haven’t finished his diary yet, but I’m sure he did. These chicks are thinking, “God’ll make a way out of no way and get me out of this shelter eventually. Til then, I’ll just hang on. As long as I know I can retire, I’ll be OK.”

Good luck to him getting them to understand that if there’s anything left in their 401Ks after what “the smartest guys in the room” have done to us, they’d be better off getting out of debt now. Financial literacy programs like this one need to happen all over the country, and not just for the poor.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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