The Opportunity Cost Of Ignorance: Examining The State Of American Financial Literacy
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In the modern era, individuals have unprecedented access to a wide variety of financial information and financial products. Technological innovation allows for great opportunity, access, and freedom of choice within financial markets, but at the same time, requires individuals to take greater responsibility for personal financial management, and perhaps, leaves room for exploitation. Acknowledging the rapidly evolving and complex nature of the modern financial industry, this thesis analyzes key questions and trends regarding the state of American financial literacy. The topic is addressed in a series of three chapters. The first explicitly defines the term “financial literacy” and communicates why promoting financial literacy is more important today than ever before. The second chapter discusses various sources of information—the education system, employers, media outlets, and financial firms themselves—to highlight how an individual might gather and utilize financial information in order to advance their own state of financial literacy and, ultimately, make financial decisions. The final chapter of this paper explores the relationship between financial literacy and government agencies, like the Consumer Financial Protection Bureau, by highlighting three case studies—the 2008 Financial Crisis, LIBOR scandal, and Wells Fargo Bank’s account fraud—in order to reveal potentially troubling links between financial literacy, Main Street, and Wall Street. Ultimately, this paper finds the state of American financial literacy to be troubling, and disappointing at best. While progress has been made, particularly since the Financial Crisis, the need for additional research, broader awareness, and increased accountability with respect to financial literacy advancement efforts remains great.