The Resurgence of Calls For Financial Literacy
Today is the last day of National Financial Literacy Month. At a time when the economy has come to a grinding halt, it seems pertinent to talk about financial literacy, or, more accurately, the fallacy of financial education. Agata Soroko recently published a short essay in Public Seminar -- The Financial Literacy Delusion. In it, she details how calls for financial education already are ramping up in light of the coronavirus's highlighting how little savings most Americans have. I suspected that the refrain that it's people's fault that they didn't have sufficient savings to cover a few months, and thus that they exacerbated the economic downturn with their inability to control themselves enough to save, would emerge with a vengeance in the coming months.
Combating that narrative will become more important than ever, as a matter of economic policy, but also of kindness and understanding to each other. Indeed, it's important right now as Congress considers how to help American families during the crisis. As Slipster Dalie Jimenez, Chris Odinet, and I wrote in our just-uploaded-to-SSRN essay, The Folly of Credit As Pandemic Relief, forthcoming in UCLA Law Review Discourse, in the CARES Act, Congress predominately provided relief to Americans in the form of credit products, not actual cash. This very likely will prove to be problematic because people will be unable to repay in the coming months, just as they are unable to pay for their necessities now. They simply do not have the money, and will not in the future because people still won't have sufficient income to accumulate meaningful savings. As Soroko writes, financial education cannot solve widening income disparities, rising costs, and wealth inequality--the roots of why many Americans have so little savings.
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