Shut Up About Financial Literacy
Economists Darrick Hamilton and William Darrity, Jr. offer a beautiful illustration of this challenge in a new paper on education, financial literacy, and the racial wealth gap. Much like explanations for racial and class disparities in higher education, popular explanations for racial disparities in wealth focus on the poor financial choices and decision-making by people of color. But as the authors point out, the “framing is wrong — the directional emphasis is wrong. It is more likely that meager economic circumstance — not poor decisionmaking or deficient knowledge — constrains choice itself.”
Indeed. “Financial behavior and financial literacy are practically limited for households and race groups with little to no finances to manage.” It’s not that students of color — or students from low-income families — don’t understand the importance of saving. It’s that they don’t have money to save!
This fact cannot come as a surprise. The question is who benefits from ignoring it, and instead investing in financial education rather than lowering the price of college? Answer: the political and economic elite, who — as Hamilton and Darrity explain —employ a “neoliberal perspective, where the free market, as long as individual agents are properly incentivized, is supposed to be the solution to all our problems, economic or otherwise.”
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