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  • Marcus J. Hopkins

The False Promise of Financial Literacy

The Barriers of Poverty & the Real Cost of Living

The False Promise of Financial Literacy - The Barriers of Poverty & the Real Cost of Living

By: Marcus J. Hopkins

May 9th, 2023

"A new study shows West Virginia is the 14th lowest state in the nation in terms of adults who are financially literate" (Wright, 2023).

This headline is one of many that have come across my daily news feed, each decrying the abysmal state of adult financial literacy across the United States. State legislatures across the country—particularly in Appalachian states—have been rushing to include Financial Literacy courses as a K-12 graduation requirement.

According to a Bill Tracker created by Next Gen Personal Finance (NGPF), a Palo Alto-based 501(c)(3) non-profit organization that aims to implement personal finance education in K-12 schools across the U.S., 93 bills related to financial literacy were introduced across 32 states in the 2023 state legislative sessions (NGPF, 2023).

The concept of Financial Literacy isn't new; it's been around as a concept since at least the 18th Century. Benjamin Franklin, at 31, penned a column in Poor Richard's Almanac titled, "Hints For Those That Would Be Rich," in which he famously closed, "A penny saved is two pence clear." For much of the 20th Century, Home Economics courses taught basic skills such as how to balance a checkbook, how to save money and plan meals to save money, and other financial skills, though those courses were primarily aimed at "homemakers" (i.e., women).

States with a financial literacy course graduation requirement. States: Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Michigan, Mississippi, Missouri, Nebraska, New Hampshire, North Carolina, Ohio, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia

While the concept of Financial Literacy has been around for a long time, states have only recently become fervently interested in reviving the topic. This increased interest spiked during the COVID-19 pandemic when many households—particularly people with lower incomes—faced the risk of financial ruin as a result of furloughs, layoffs, and other pandemic-related shutdowns and work stoppages in order to stem the spread of the disease. Politicians suddenly realized that American households have spent a little more than four decades borrowing more and more money in order to make ends meet and trying to chase the "American Dream," often under the advisement of unscrupulous financial and educational institutions who promised them that these investments would lead to better outcomes down the road.

Of particular concern is the growing student loan crisis, over 50 years in the making. Education costs have skyrocketed since the 1970s:

In the 1968-1969 academic year, it cost just $1,545 to attend a public, four-year institution, including tuition, fees, room, and board.

In the 2020-2021 academic year, that cost was $29,033 (National Center for Education Statistics, 2023)

These data indicate that the cost of education has far outpaced the rate of inflation. Had education costs remained in line, they would be around $12,000/year.

These high costs have all but forced students—particularly those who attended college from the late-1980s on—to take out loans to afford their education; an education that we have been told would lead to exponential increases in our annual earnings, upward social mobility, and better long-term economic outcomes.

Those promises, along with those made by financial institutions, have failed to materialize.

The idea behind this push for increased Financial Literacy is that, if Americans better understand basic skills like financial management, load and credit card interest rates, financial planning, and investment, the debt-to-earnings ratio that American households currently hold will decrease over time; that people will stop taking out loans they can't pay back; that household budgets will become balanced.

What this theory fails to take into account is that all the financial literacy courses in the world won't change endemic generational poverty.

While financial literacy skills are, without question, important, understanding how to balance one's checkbook (and, let's be honest, who even uses a checkbook in 2023?) will not increase one's bank account balance. Knowing how to invest money won't increase wages to the point where families can afford to invest.

A map showing rates of economic mobility in the United States

Research has long indicated that intergenerational economic mobility—the chance that younger generations will see increases or decreases in financial success from the previous generations—is particularly low in the U.S. Since the 1980s, economic mobility has, in fact, DECLINED, meaning that successive generations are ending up poorer than their parents' generations. This is particularly true in Appalachia, and there are additional barriers faced by Black and Brown Americans (Mazumder, 2022).

The fact of the matter is that the cost of living—by which I mean the actual cost of living, rather than the idealized measure used by the Bureau of Labor Statistics—has long outpaced the wages that employers are willing to pay. Wage increases have consistently gone to the people at the top of the ladder, while earnings for those at the bottom have largely stagnated, leaving the poorest among us struggling to afford even the basics of shelter, food, utilities, and healthcare.

Politicians continue to labor under the delusion that the poor can simply financially manage their way out of poverty—a theory that places the onus of poverty not on the unwillingness of employers to pay a living wage, but upon the poor for being too uneducated and financially illiterate to pull themselves up by their imaginary bootstraps.

And so, we will require the children of the working poor to learn how to manage sums of money that they will likely never make; to learn how not to take out loans for an education they're told they need in order to move up the income ladder; and most importantly, to learn the very valuable lessons that you have to have money to make money and that the best way to not be poor is to be born not poor.

We must realize that no amount of financial literacy will "fix" poverty. It's a false promise offered up by those who blame the poor for being and remaining poor, predicated upon the false belief that we live in a land of opportunity to which everyone has access.



Chetty, R., Hendren, N., Kline, P., & Saez, E. (2014, September 14). Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States. The Quarterly Journal of Economics, 129(4), 1553–1623,

Mazumder, B. (2022, April). Intergenerational Economic Mobility in the United States. Policy Brief.

National Center for Education Statistics. (2023). Average undergraduate tuition, fees, room, and board rates charged for full-time students in degree-granting postsecondary institutions, by level and control of institution: Selected years, 1963-64 through 2020-21. Digest of Education Statistics.

Next Gen Personal Finance. (2023). 2023 Financial Education bills in US States. Palo Alto, CA: Next Gen Personal Finance: Bill Tracker.

Wright, D.K. (2023, May 08). West Virginians rank low on a scale of financial literacy. Wheeling, WV: Nexstar Media Group, Inc.: WTRF: Money/Economy.


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