The data shows that women and ethnic minorities are paid less, are broadly less well off financially, and are also less financially literate. Relative financial illiteracy compounds social and structural biases and historical hardships. This implies financial literacy is even more important than we may have realised for social justice and social mobility.
How Covid Affected Personal Finances
These realities were exacerbated during the COVID-19 pandemic, with disproportionate outcomes for minorities and women. People who were struggling on the margins already have felt the pain of further exclusion. As the world grapples with complex issues surrounding social injustice, it’s clear that we need to find new, more creative solutions to these longstanding issues.
As many families and businesses were plunged into further debt and uncertainty during the pandemic, financial literacy needs to be made a priority. In some US states, this is becoming a reality.
Can Schools Help?
Twenty four state legislatures are considering bills on financial literacy. There are several factors at play here, with social justice just one. Student debt is another concern, with many in the workforce struggling to obtain homeownership due to mountains of debt.
In 2020, high school students across 21 states were obliged to take a course in personal finance as part of their studies. Indeed, programs like this have gained favour over recent years, with 65% of American’s believing that schools should provide financial education. Teaching the next generation about saving, investing, and financial security could close the wide margins of inequality throughout the West.
Indeed, the same study by the Charles Schwab Corporation suggests that almost 9 in 10 Americans indicate that a lack of financial literacy skills contributes to wealth inequality. With the average millennial having a credit card debt of $4000, it’s clear that this problem extends beyond the classroom.
Dismantling the Common Misconceptions About Financial Education
These figures counter the common misconception that financial literacy is only required for children. While education for kids will bear fruit in the long run, there are problems here and now that can be addressed. Starting financial education early is great, but the learning doesn’t end at school.
Regardless of race, sex, or educational background, all adults need to learn about money management. Being responsible, independent adults means that we can budget, save, and even learn to invest. And it’s never too early to start — just out of college, when you’re starting a family, or even when you are preparing for retirement.
As mentioned earlier, this need is even more acute for those who have been disproportionately affected by the pandemic and historical injustices. For women and minorities, getting access to financial literacy programs can transform their lives in the short and long term. Savings can help start a business, support a family, and increase career options in several ways. These benefits can then contribute to economic mobility and shrink the wealth gaps present in our societies.
The Limits of Financial Literacy
For some, however, education is just the start. Writing in the Washington Post, Helaine Olen suggests that people’s finances were not in distress because they lacked financial knowledge, but also because of a lack of money. She cites the pre-pandemic savings rates of 7-8% and post-pandemic rates of 27% as proof that people know how to manage their income — if they have enough.
In addition to savings going up, credit card and overdraft debt went down. Olen’s thesis is that government stimulus packages helped people act as they might if they had more disposable income and government assistance.
Of course, while the pandemic was an opportunity for some to slow down, reduce their spending and pay off some debt, it still furthered the wealth gap between the rich and the poor. While financial literacy won’t solve all our problems, neither will indiscriminate public spending.
While government programs can help, parents have a responsibility too. As Jason Young, co-founder of MindBlown Labs suggests, giving children a small allowance and encouraging them to save for toys teaches delayed gratification.
Social problems and inequality are complex issues with many facets. But the one thing that we do know is that women and ethnic minorities are struggling to close the wealth gap in many cases. Even in difficult social situations, financial management is a vital tool in the battle against inequality and the goal towards financial independence.