The History of Financial Literacy

The early years of financial literacy

Financial literacy in America has a history as old as the country itself. Its early years, however, were entirely informal. Schools didn’t offer classes in personal finance, and professions that now provide financial literacy for adults didn’t exist.

During that period, tips about money management might have come from parents, friends, or professional mentors. One of the earliest records of this type of personal finance education came in the year 1737. Benjamin Franklin was 31, and he had recently made a name for himself by writing and publishing an annual almanac. In that year’s edition, he wrote a column titled “Hints For Those That Would Be Rich.” In it, he signed off with a bit of financial advice: “A penny saved is two pence clear.”

What did he mean by that? Well, the phrase probably made more sense to readers at the time of its publishing. However, the line eventually morphed into an adage that just about everyone will recognize: “A penny saved is a penny earned.”

While this line is attributed to Franklin, it’s a misquote, and there is no evidence that he actually said it.

Financial literacy in the 19th century

In the 19th century, financial literacy still lacked a venue for formal instruction. However, money management was just as important as it is today, and records show early attempts at financial education.

One example from the time period comes from overseas, with James Gilbart, a manager for London & County Bank. Gilbert moonlighted as a personal finance author, and in 1849, he published an article titled “Ten Minutes’ Advice about Keeping a Banker.” In it, he detailed the advantages of opening a bank account and explained the process for those who might be intimidated by it.

Gilbart published extensively, writing for his fellow bankers as well as the general public. He believed that everyone—not just the rich—should have a bank account, and he strove to educate the public about banking and its benefits.

Financial literacy in the 20th century

In the 20th century, financial literacy was taught in an official way for the first time. For Lou Haverty, a Chartered Financial Analyst and creator of the finance commentary site Financial Analyst Insider, this development can be traced back to acts of Congress that established extension programs and provided funds for research.

“Personal finance as a serious educational topic only started in the 20th century,” he told OppU.

One act that had a significant impact on financial literacy education was the Smith-Lever Act of 1914. It created university programs that conducted research and taught the public “useful and practical information” about a range of topics, including personal finance.

However, in the 20th century, what is now called “financial literacy” was taught in courses of different names. These generally fell under the category of home economics, with courses that might have been titled “household finances,” “family finances,” or “consumer economics.” The basis for incorporating financial literacy into these courses originated at the University of Chicago, according to Alexander Lowry, a professor of finance at Gordon College.

“The earliest known research in personal finance was done in 1920 by Hazel Kyrk,” Lowry told OppU. “Her dissertation at University of Chicago laid the foundation of consumer economics and family economics. Margaret Reid, a professor of home economics, is recognized as one of the pioneers in the study of consumer behavior and household behavior.”

Financial literacy today

Financial literacy advanced through the 20th century. Today, it’s taught in high schools and colleges around the country. At last count, 47 states included personal finance in their K-12 standards. However, of those, only 27 states are required to offer a personal finance class, and only 23 states require high school students to take one. Additionally, The Nation’s Report Card on Financial Literacy for 2022 gave 35 states a grade of “C” or lower for their efforts to teach financial literacy.

While there’s room for improvement, financial literacy in America has come a long way, and there are many schools and groups that do a great job of teaching it. One such program is Junior Achievement, which currently reaches 3.3 million students per year in classrooms and after-school locations.

For Junior Achievement, financial literacy is a critical part of preparing students for success. The program uses experiential lessons to connect what students learn in the classroom to the real world, demonstrating to students how knowledge correlates to earning.

“The ability for people to navigate the complexities of today’s financial realities is a key component to better financial behaviors and personal empowerment,” Kat Delgado Kirkwood, senior vice president of the Southern California branch of Junior Achievement, told OppU. “Without financial literacy education, the economic prosperity of the country as a whole is at risk.”

Who teaches financial literacy?

In the vein of Junior Achievement, there are other organizations with financial literacy programs that drive the bulk of education and policy change. These groups reach populations at the local, state, and national levels.

Not-for-profits

Jump$tart Coalition is a nonprofit founded in 1993 that relies on its partners and affiliates to advance the financial literacy of children and young adults. The nonprofit also focuses on policy advocacy to promote better national standards for financial literacy.

Founded in 1972, the National Endowment for Financial Education is a nonprofit national foundation that services individuals and families with financial education. Its goal is to empower financial decision-making at all stages of life.

For nearly 70 years, the Council for Economic Education has worked to provide K-12 students with practical knowledge about money.

Credit unions and banks

Credit unions are cooperative institutions. Functioning similarly to banks, credit unions provide a wide array of financial services. What makes them unique is that they operate on a not-for-profit model rather than as a for-profit business.

Banks also teach financial education. Leaders in the banking industry often hold strong beliefs backing responsible finance. As such, it holds that they provide clients and communities with the financial education tools and resources needed to lead fiscally responsible lives. To do so, U.S. banks often invest in financial education initiatives—from free community courses to more hands-on experiences.

Colleges

Many students enter college without any formal exposure to financial education. In response, colleges and universities have begun a growing movement to provide financial literacy that covers topics such as budgeting, student loans, credit cards, salaries, and benefits packages.

On a few campuses, a dedicated team is housed within a financial aid office, financial literacy office, financial wellness office, or student services center. They offer a variety of educational programming that promotes financial literacy and financial wellness.

Some higher education institutions, such as Indiana University and Champlain College, are challenging the traditional understanding of financial education through holistic financial wellness programs.

The Higher Education Financial Wellness Alliance (HEFWA), an annual financial wellness summit, provides an opportunity for educators to share ideas and advance the conversation around financial education.

Developments in financial literacy

With modern technology comes new opportunities to teach financial literacy, and financial educators active in a range of spaces and industries have leveraged digital platforms to suit their needs. They’ve uploaded their financial literacy curriculum, taken advantage of the multimedia potential of the web, and reached users across the globe. Digital games provide parents with education tools that cater to young children and deliver financial literacy for kids.

Financial literacy might sound complicated: budgeting, tracking expenses, saving smartly, and building wealth. But banks and private developers have created an array of apps to help consumers tame their finances. They might allow customers to monitor their bank accounts, keep track of their expenses, or work toward a saving goal.

Lou Haverty, CFA, spent 16 years in the financial services industry and 14 years in corporate banking. He created Financial Analyst Insider as a way to provide news and information for aspiring financial professionals and people interested in learning more about the financial industry.

Alexander S. Lowry is a professor of finance as well as advisor and Board of Directors member for fintech and financial services companies. As a professor, he helps students understand how the financial services industry works. As a Board member, he works with fintech and financial services companies that want to transform traditional industry business models to unleash exponential growth and value. As a CEO advisor, he mentors CEOs and Boards who want to turn strategy into action. He's currently working with 20+ early stage and middle market businesses.

Kat Delgado Kirkwood is Chief Impact & Partnerships Officer for Junior Achievement of Southern California.