The partial federal government shutdown showed us more than President Donald Trump’s willingness to deprive citizens of services, damage national treasures and place ordinary families under financial stress over a border wall that isn’t a cost-effective way to stem illegal immigration.
It also illustrated that the recession hasn’t taught Americans nearly enough about managing their finances. Too many live paycheck to paycheck. Multiple articles profiled federal employees who were out of money by the end of their first week on furlough, selling precious items they had collected and setting up online fundraisers. One mother fed her kids an unending diet of canned spaghetti and bread because those were cheap.
Perhaps in the days of stable employers, steady employment, easily accessible medical care and robust pension plans, there was less need for financial savvy. Credit cards were barely an item, let alone credit card debt.
Planning for the future didn’t require understanding the stock market because people didn’t need 401(k) accounts. But now, the education system’s failure to teach financial literacy leaves graduates unprepared and scarily vulnerable.
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That’s not to say all financial troubles are the fault of the people who suffer them. The economy’s continual squeeze on the middle class makes it tough for many families to survive, much less save money. Single-parent families have single paychecks as well as the need for more childcare much of the time.
The Affordable Care Act made it possible for middle-class families to get health insurance, but it sure didn’t make it truly affordable for them. In most states, the minimum wage has fallen ridiculously far behind the cost of living. People take on outside gigs and second jobs yet still find themselves behind.
But these weren’t entirely lower-wage workers without benefits. There were many government employees, often with college degrees, making decent, if not luxury, salaries with health coverage provided. They weren’t living on a grand scale, but they were buying enough extras — collectibles, antiques, nice cars — to make these items worth selling (at a big loss) as soon as the paycheck stopped.
Their salaries would pick up again once the shutdown ended, but they lacked the money to bridge through even a few weeks. And they’re not the only ones. Living paycheck to paycheck happens to professors and software engineers, too.
Too few Americans fully grasp such concepts as cost-of-living increases or compound interest. Reading financial reports to understand the stock market and the economy is a skill dominated by a few elites. But the needs are far more basic.
People don’t know how to budget. If you can’t budget, there’s no money for the nearly inevitable tough times. People also need to know which resources are available, such as no-questions-asked food banks, when the unexpected strikes hard. A knowledge of low cost ways to eat nutritiously would also help.
A 2016 report by the Financial Industry Regulator Authority found that most Americans spend either more than they earn, or just about exactly what they earn.
And a report last year by the National Foundation for Credit Counseling found that only 40 percent of Americans have a household budget and track what they spend. Nor do we seem to have learned from the recession; the number who don’t budget has remained the same since 2007.
No wonder nearly a third of Americans are not growing their non-retirement emergency savings — the kind of savings needed to see people through a spell of unemployment.
And as advertising and marketing grow more sophisticated about divorcing us from our money, consumers have not kept pace. We don’t recognize misleading claims and we don’t realize that celebrity influencers who tout products are actually selling to us.
According to the website Marketing Land, most Americans are at least somewhat influenced to make purchases by celebrities and social media influencers. Reporting on a recent survey, the website notes that about half of consumers don’t know any of the hashtags used to denote “sponsored content” — thinly disguised advertising.
Even colleges are spending a fortune these days marketing often unaffordable educations to unaware students and their parents.
Financial literacy is an interdisciplinary study that encompasses skills in math, economics, close reading and above all, critical thinking Preferably, experts say, it should be taught throughout a citizen’s education, with special emphasis in late high school, when students are thinking about and preparing for more financial independence. And California is among the states that need to get on the ball.
A 2018 analysis by WalletHub ranked the state 33rd in financial literacy. Give us credit: We were fifth in the rate of adults with a rainy-day fund, but our overall “financial planning and habits” came in 46th. The Center for Financial Literacy at Champlain College gave California an “F” on the teaching of financial literacy in its 2017 national report.
Lack of financial literacy is putting too many of us inches away from ruin. The state’s education leaders should see that this isn’t adding up right for our current and future workforce.