Drona Gaddam

The Effects of Financial Literacy on the Well-Being of a Community

Started Jan. 22, 2024

Abstract or project description

The following research paper intends to analyze the correlation between financial literacy and the socioeconomic characteristics of different communities. Financial literacy is the ability to manage personal finances in an effective way (saving money, spending safely, investing intelligently), and it has been identified as a deficiency. A study done by the Program for International Students Assessment, found that 22% of high school students lack basic financial skills (1 in 5 U.S. Teens Lacks Basic Financial Literacy Skills, n.d.). Additionally, the National Financial Educators Council found that the average cost of financial illiteracy per person in the United States was $1,819 (Bilal, 2023). Many programs have been put in place to address this problem, chiefly within public education. Such programs will be analyzed as a part of the project. This study aims to assess the importance of financial literacy through its effects. Individual state financial literacy data from FINRA was collected and correlated to the following socioeconomic characteristics: crime rate, unemployment rate, and median income. The study identified a clear link between increased financial literacy and better socioeconomic conditions. More importantly, however, contradictions were identified between the current methods of financial education and quantitative data measures; states with a lot of financial literacy programs had low financial literacy percentages. Based on this contradiction, recommendations on improvements within financial literacy education were made. The researchers also categorized financial literacy by age and race to show where opportunity for improvement existed in certain demographics.