The Washington PostDemocracy Dies in Darkness

Opinion Americans didn’t need financial literacy month. They just needed money.

(Jenny Kane/AP)

Last month was financial literacy month. I bet you didn’t notice. I have written books on personal finance yet all but forgot about it.

Usually in April I am deluged with financial literacy pitches, but last month I received a mere handful.

It makes sense, however, that the personal-finance industrial complex has been quiet in 2021. The past year proved the lie of financial literacy: Many people’s finances were not a mess because we needed lessons in how to handle our money. We simply needed more money — and a government that cared about us.

Financial-literacy types have said for years that Americans would save more if only someone taught them how to do it. Yet last month, in the wake of $1,400 federal stimulus payments that started going out in March, the personal savings rate reached a staggering 27.6 percent. Before the pandemic, the personal savings rate hovered between 7 and 8 percent.

When the economy shut down last spring to combat the spread of covid-19, financial prognosticators expected people to scramble for money and to run up debt. But many borrowed less. The personal savings rate soared. Instead of continuing to run up credit card balances, many people paid them down. The amount of money owed on plastic fell. Credit scores increased. Overdrafts and related fees fell.

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Some of the reasons were obvious: Those who didn’t lose their jobs continued to have income — and fewer places to spend it. The surging stock and housing markets improved Americans’ finances, especially those in upper income brackets, where job loss was less common.

And initial pandemic stimulus and fiscal relief — part of the Cares Act passed last year — included a $600 federal supplement to weekly unemployment benefits that allowed many people to collect more from unemployment than they had earned working. The government also paused student loan payments and sent direct payments to Americans, including many who had not lost jobs. These measures helped people. A CNBC survey in March found that almost half of respondents planned to put some of the most recent stimulus payments toward debt reduction or savings.

Of course, not everyone prospered. Many who received direct payments spent them on food and utilities. In some ways, the pandemic exacerbated the gaps between the haves and have-nots: Some with savings bid up the price of housing, while others relied on eviction moratoriums to keep a roof over their heads. But overall, people given money used it for immediate needs and long-term improvements to their financial positions.

So, should we be surprised? “Financial literacy” sounds wholesome, but much of the movement pins the blame for inequality not on the victors in our capitalist system but on the losers.

After the financial crisis of 2008, powerful players on Wall Street, in corporate America and elected officials didn’t collectively take responsibility for pushing people into dodgy mortgages, underfunding higher education or doing almost nothing to control out-of-pocket spending on medical care. Instead, some deemed individual Americans careless with their money and said they needed to educate themselves.

And here’s the rub. Research shows that most people who take a financial-literacy class forget almost everything they learn in less than two years. Nobel Prize-winning behavioral economist Richard Thaler calls the concept of financial literacy “impossible,” because resolving financial dilemmas is often complicated, with correct answers not obvious no matter how much knowledge someone possesses. But our society worships at the altar of self-help. Poll after poll finds large majorities of Americans say financial literacy should be taught in schools, because they think financial illiteracy plays a role in poverty, inequality, the gender gap in pay and wealth, and other money issues.

Yet that’s not the issue. Women don’t accumulate as much savings as men because they are paid less — it’s not for lack of studying personal finance. Moreover, women experience more checkered careers. Millions of women exited the workforce over the past year as schools and child-care options closed, with significantly more female parents than male parents supervising Zoom kindergarten and other e-learning. Similarly, the reason Black Americans possess less wealth isn’t because they can’t properly calculate an interest rate but because they experience systemic discrimination that has inhibited household wealth, intergenerational wealth and median earning capacity. Inequality is surging not because people don’t know how to manage their money but because the wealthiest Americans bought themselves a government that for decades took care of their financial interests ahead of everyone else’s.

The truth is in the numbers. When they have adequate funds, many Americans are fine stewards of their money. I suggest we add that “fact” to financial-literacy curriculums.

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