The Paradox of Financial Literacy: An Obstacle & Pathway to Upward Social Mobility

Crincoli, Anthony

Peacock Scholarship

The Paradox of Financial Literacy: An Obstacle & Pathway to Upward Social Mobility

Public Deposited

This paper presents the case that financial literacy can promote upward social mobility and that a lack thereof contributes to growing poverty rates across the globe amongst various different population groups. In particular, this paper outlines the negative implications associated with financial illiteracy by focusing on soon-to-be-retirees, college students, beginning investors, African Americans, and women. The paper starts by providing definitions of financial literacy and social mobility. It then outlines the extent of how financially illiterate individuals across the world are. In this section, it is made evident that financial education correlated with wealth and that there are financial literacy disparities among minorities and women in society. This section also includes two surveys and a statistical interpretation of the data to demonstrate the extent of financial illiteracy amongst college students. For the surveys, one was of college students, and the other was of professionals in later stages of their careers. For both populations, the survey asked a set of questions to gauge the financial literacy of the individuals. Using a least squares regression analysis, this data suggests that age plays a role in how financially literate individuals are. Based on this information, it is concluded that older individuals are more financially literate as a result of learning from mistakes, not from formal education. After this, the paper explores the negative effects of financial illiteracy, followed by the benefits provided by financial literacy. At this point, it is concluded that financial illiteracy contributes to retirement insecurity, the growing student loan crisis, erratic trading behavior, racial and gender wealth inequality, the use of harmful loans, and poor spending decisions. It also is concluded that proper financial education can result in wealth accumulation through investing, a comfortable and potentially early retirement, healthy spending habits, individuals having a financial safety blanket, and tax savings for the federal government. Lastly, this paper offers suggestions to prevent financial illiteracy from persisting in the future, so more individuals can experience upward social mobility. The solutions suggested include the implementation of personal finance in high schools, encouraging interpersonal dialogues regarding finances, and making finance an enjoyable subject for individuals to follow.

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