What does it mean to be financially literate?

Mint Making the grade

Click on the image above to view the entire infographic from Mint.com.

Financial literacy has been a popular topic in recent years. Type that phrase into Google and the search engine will return hundreds of articles that describe how lacking Americans are on the subject. There are movements to establish required financial literacy classes in grade school and high school. Personal finance blogs like this one seem to be more popular today than ever. Becoming a financially literate nation appears to be a priority.

But what does it mean to be financially literate?

Perhaps you’ve never thought about this question before; maybe you always figured you would keep learning about money matters and hopefully put it all to use someday. There’s nothing wrong with this approach on a personal level. However, there is value in having a set of financial literacy standards on an educational, organizational, and national level. Without one, it’s impossible to properly evaluate the effectiveness of the information, programs, and practices we advise and implement to improve financial literacy.

We know what financial literacy is and we have ideas about how to teach it. But how should we assess whether a person is “financially literate?” We’ll be researching and discussing this topic in the upcoming weeks and would like to hear your thoughts on the subject. You can leave a comment below or contact us with your ideas on what it means to be financially literate.

For more information on financial literacy in America, check out Mint’s infographic, “Making the grade: understanding America’s financial literacy.

3 thoughts on “What does it mean to be financially literate?

  1. I think that to be financially literate, you have to be able to not only know how to handle your personal finances, you also need to know the basics of micro and macro economics.

    • I think the basics of macroeconomics (and to a certain extent, microeconomics) is often overlooked in financial literacy. I don’t think it’s necessarily done on purpose — individuals may be so wrapped up in figuring out their personal finances that they never even think about these subjects.

      I agree that they’re important though as they can be particularly applicable when people start taking out loans and investing.

      Thanks for the comment!

  2. The economics comment is interesting and is very relevant to financial literacy. Economics could be taught from a personal viewpoint. Instead it is highly abstract and polls show students quickly forget basic principles. For example, how many remember that consumers consume to the point where marginal utility per dollar spent is equalized across products and services? Instead, students need to understand that they are going into an economy where the best and brightest are ready to come at them using formidable resources, bombarding them 24/7. to convince them to spend more than they earn for products and services they don’t need. They should learn not just that comparative advantage is important in understanding international trade but also it understanding the slice of the GDP pie they will get in the work force.

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