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Can Financial Education Rebuild America’s Economy?

Lewis Humphries

In recent times, there have been suggestions that the United States may be on the verge of losing its standing as the world's omnipotent economy. In addition to the impact of the global recession, the U.S. has also suffered from a steadily rising youth unemployment rate, which peaked at 26.2% in 2011 and represents a decade-long decline of American economic influence.

Despite this, however, statistics suggest that the decline of the U.S. economy may have been exaggerated. Not only has it showcased signs of modest and consistent expansion throughout the last financial quarter, but disappointing growth figures from China have also cast considerable doubt on the assertion that it will depose America as the world's leading economy by 2016.

The Issue of Financial Literacy and the Diminishing Influence of the U.S.
While various statistics can be used to either support or argue against America's standing as the leading international economy, it cannot be denied that the U.S. faces considerable fiscal challenges in the years ahead. As sequestration cuts of approximately $80 billion begin to impact low-income households and the working poor, for example, the federal government is clearly struggling with the consequences of failing to determine a long-term financial course. Part of the Budget Control Act, these reductions also offer an insight into how a lack of decisiveness has tarnished America's reputation as an esteemed economic haven.

America has even fallen behind Australia and the United Kingdom in the fight to promote financial literacy, which has become a significant global concern in the wake of the recession. Although the U.S. Consumer Financial Protection Bureau (CFPB) recently unveiled a new initiative to advance financial education in Grades K-12, this came after political leaders in the U.K. and Australia had already established legislation that made this subject matter mandatory in their respective countries. Where once America would have led and blazed a trail for others to follow, it was forced to tread meekly in the shadows of more proactive nations.

Local Government and the Role of the CFPB
Of course, it is fair to suggest that the U.S. may have been partially hindered in this instance by its political infrastructure. Education and curriculum management is governed at the state level in the U.S., which means that each local authority has the power to determine how and what its children are taught. This is diametrically opposed to the systems operated in the U.K. and Australia, where a central governing body makes such decisions. So with a federal mandate for K-12 financial education unlikely in the U.S., the fact that there is at least a proposed initiative and a common consensus between state leaders should provide some comfort to American citizens.

In addition to this, the involvement of the CFPB in this matter has provided some much needed momentum to the promotion of financial literacy among American students. With a valid reputation as the leading protector of consumers and their financial interests, the agency appears to have turned its attention to children and their role in driving a sustained economic recovery in the future. Given the cyclical nature of recession in the U.S. and around the world, it is logical to presume that prioritizing financial literacy among youngsters offers the best chance of breaking this trend going forward.

The Benefits of Financial Education: Can it Help to Sustain an Economic Recovery in the U.S.?
So if America is to sustain its tentative economic recovery and reclaim its status as the omnipotent financial leader of the world, a nationwide program of fiscal education may well hold the key. To begin with, teaching fundamental economic basics to children will help them to develop their understanding of personal finance, and this can then be translated into practical money management skills as they grow older. This is particularly relevant with regards to consumer and household expenditures, as the news that U.S. households have reduced their debt levels by more than $1 trillion since 2008 creates an ideal platform that the next generation of adults can build upon.

With the nation's level of youth unemployment also in mind, financial education may teach students necessary financial skills that can be applied to secure future jobs. While there are far less U.S. citizens aged between 16 and 24 unemployed than there were during 2011, the current rate 16.2% remains disproportionately high. With a more streamlined curriculum that teaches relevant and practical financial skills, however, future graduates can offer a more comprehensive package to employers and help to perpetuate a long-term period of economic expansion.

The Bottom Line
While the debate concerning America's economic standing will continue to rage, the need for greater levels of financial literacy remains indisputable. While the U.S. may not be in a position to push through a federal mandate for financial education, a sustained collaboration between local authorities, teachers and parents themselves can help to impart more in-depth fiscal understanding and practical money management skills. Not only will this help the next generation of adults find work and effectively distribute their finances, it may even lay the foundations for the U.S. to re-establish itself as the world's leading economy.

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