America’s manufactured financial literacy crisis

Can inscrutability really be a failing of a system that’s designed to maximize complexity?

THE UNITED STATES has a financial literacy crisis, or so I am told.

Despite the vast and accelerating quantities of educational material produced in the US over the last few decades, the number of Americans deemed “financially literate” has remained stubbornly constant: roughly half, a judgment derived from a series of questions about things like calculating the interest earned in a savings account and the risks associated with buying a single stock.

The sentiment goes down easily, in part, because generally speaking Americans appear to be struggling economically, a related but separate fact often conflated in the popular imagination with all those low test scores. There’s a loosely threaded daisy chain of logic connecting financial literacy rates to financial outcomes: Those with a “very low level of financial literacy” are “2x more likely to be debt-constrained,” one recent (and breathlessly covered) TIAA report highlights, for example, and “2.5x more likely to spend 10 hours or more per week thinking about and dealing with issues and problems related to personal finances.” The relationship between the low level of literacy and the debt and/or time crunches is assumed causal, linear: more financial literacy, better financial outcomes.

Doubtless there’s validity to the idea that some percentage of financial wounds are self-inflicted via blunt-force boneheadedness, though in order for this theory of Americans’ slowly deteriorating financial conditions¹ to remain convincing, you have to basically shunt off the reality of our information technology environment: There’s never been more financial instruction available. It’s never been easier to get an immediate answer to an obscure question.

Still, central to the ethos of the “financial literacy crisis” is the belief that information—which is to say, the knowledge that a particular financial decision is stupid—is the most effective antidote. This can lead some pundits to the conclusion that the answer to both the weak test scores and the growing precarity is heaping on even more financial literacy, as in this quote given to the Times about the latest results, which show scores at a 10-year low: “It makes an even stronger case for financial education.” You’re likely to hear, in the middle of this wind-up, that we don’t learn these things in school. (More than 30 states now require a financial literacy course to graduate from high school, though implementation is only complete in 11 of them.) The United States produces more of this material than any other society in the history of the world, and yet, you can scarcely open a newspaper without encountering some glowing, amnesic interview with a person who has set out to “teach people about money,” as though this is the first time anyone has ever thought to do such a thing.²

None of this is to say that education is bad or wrong or should be avoided—just that there’s something that feels a little disingenuous about the latest round of urgent calls for More Education. This is at least in part because the research on the efficacy of financial literacy has been mixed for a long time, and by mixed, I mean it’s not unusual for the regression analyses found in the very papers arguing for more financial literacy to clearly demonstrate that other factors, like income,³ are almost laughably more impactful than how proficiently someone can answer a question about inflation. The differences in the finances of the top and bottom scorers are often of degree, not kind. For example, despite the topline takeaway that bottom scorers are “2x more likely to be debt-constrained,” 70% of those who scored nearly perfectly on the 28-question P-Fin Index also reported being in debt, a mere five-point drop from those who scored the lowest on the test.

What is maybe the most widely cited research on the subject comes from Annamaria Lusardi and Olivia S. Mitchell, who found in a 2014 working paper that “financial literacy alone can explain more than half the observed wealth inequality.” But their study relied on models comparing the wealth-to-income ratios of simulated groups, rather than an analysis of real-world wealth and income, and assumed the savings of the more financially literate group would yield higher returns. There’s probably some legitimacy to these assumptions, but the simple math of compounding guaranteed from the outset that the group granted a higher fictional return on their fictional investments would end up with more fictional money, gains which were assumed to flow to the financially literate based on their knowledge alone. In the final version of the paper published in 2017, Lusardi, Mitchell, and a third coauthor, Michaud, revised this estimate downward, updating the claim to apply specifically to retirement wealth inequality, and modulating their estimate of “more than half” to between 30–40%. Which is to say: Even in the clean confines of a financial simulation where there’s a straight line between knowledge and returns, 60–70% of wealth inequality in retirement is not explained by financial literacy.

It’s at this point that we skeptics could begin to pull threads in any number of worthwhile directions. We could theorize, flanked by solid evidence, that in fact income is the most reliable determinant of outcomes. We could tee up an argument about how financial literacy is no match for the actuaries at that shadowy organized crime syndicate State Farm Group who have determined, again, that your premium will rise by 20% this year, or for the median $2,623 (principal-and-interest-only) mortgage payment. But life has always been challenging and expensive, you might object, and we need a foundation that can help us navigate these realities. Fair enough.

What strikes me as most worthy of discussion, then, is not that personal finance education tends to fail as a solution to low wages or swelling fixed costs, but that it also tends to fall short on its own terms, as the chief difference-maker⁴ in the outcomes that are ostensibly most responsive to our behavior.

External factors held equal, it seems to me that those who typically build the most robust financial fortresses—the biggest emergency funds, the satiated retirement accounts, the lowest credit card bills—are often not those with the most technical proficiency, but those who possess a few totally unrelated characteristics. For this countercultural group, it’s as though whatever little consumer pulse throbs longingly inside most of us, tugging us around by the soft underbelly of our desire, is demagnetized, defective. They don’t respond to the same stimuli, and as such often express confusion about why everyone else’s Discover statements are so high. It is not knowledge but disposition that seems to make the most meaningful difference. They seem curiously immune to whole swaths of American culture.

Writing from his cell after Mussolini threw him in prison, the Italian Marxist Antonio Gramsci developed his theory of cultural hegemony, or social structures that naturalize ideas and norms largely benefiting the super-minority ruling class of a society, consolidating consent for an order that would otherwise be recognizable as Not In Your Best Interest. You have cultural hegemony to thank for everything from beauty standards to corporate fast food to the ubiquity of lobotomizing television programs; in other words, concepts that might otherwise trigger your objection in a vacuum but which have become Common Sense elements of an average life.⁵

This essay is continued after a message from our partner, Betterment.

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And now, back to the essay:

American cultural hegemony has a distinct throughline. Our entertainment tends to favor and amplify displays of affluence. Advertising trains us to communicate status and success through products. Cosmetic and sartorial choices are variations on that same theme; what looks “good” is often synonymous with what looks expensive. (Raise all of this to the exponent of a fetishized work ethic that says wealth and success are themselves evidence of moral uprightness.) That these inclinations are ultimately internalized such that the desire for cashmere cardigan sets and granite countertops seems to spring from the sacred depths of your personhood is exactly how the whole thing is designed to work; it is powerful only because the desire feels well and truly yours, such that denying it feels like denying yourself.

Far from being a bulwark against this culture, financial literacy is itself part of this same superstructure, a pillar that mostly exists to reinforce the idea that there’s a responsible and correct way to engage with all this naked wanting. It’s less a countervailing force than a legitimizing one. Here’s how to manage the complicated debt products you’re using to buy and furnish your home, here’s how to calculate the maximum car payment you can afford after your trade-in, here’s how to protect yourself from a needless layoff.⁶

All of it accrues to the implicit suggestion that such complexity is reasonable, even necessary; that knowledge is in fact a perfectly appropriate and not at all anemic response to an abstruse financial ecosystem designed to separate you from as much of your money as our weakened consumer protections will allow. Complexity is incentivized and therefore continually increases, and like clockwork, the calls for additional knowledge—not, you’ll notice, simplicity—ramp up, existing material now deemed too “basic” or “out of date.” It’s a never-ending arms race, so the “literacy” process can never really end, because the profit motive demands that the system continue evolving beyond your understanding. Americans who buy a home not knowing their mortgage payment can keep going up forever or that they’ll need to allot tens of thousands of extra dollars for opaque fees to secure their loan, for example, aren’t “failing at financial literacy” so much as they are ignorant in the precise ways the system⁷ intended.

And so I posit that those practical traits which often make someone “good with money” in a sturdy, enduring way are those that have little to do with financial proficiency at all: traits like resourcefulness, a baseline state that trends toward contentment, being generally less suggestible to the logic and spectacle of marketing. Folks with these characteristics tend to have largely inexpensive hobbies and don’t mind—or maybe outright enjoy—the sort of monotonous labor required to maintain a life.

My brother-in-law is a surgeon. He is congenitally frugal. I have no idea how much money he makes, but practical decisions appear to come easily to him: the unfussy car, a borderline-spiritual opposition to silly little beverages, exclusively home-cooked meals made from store-brand ingredients sourced from a discounted bulk retailer. He is the only member of our family with an Android, a choice that I assume he made after a sober cost-benefit analysis, despite our merciless taunting about his green texts. As far as I can tell, none of this abstention strains him. He’s not making “sacrifices” or constantly battling back unruly compulsions. Preserving his resources appears to be the natural byproduct of the way he moves through life, not an exercise in conscious willpower.⁸

I feel confident that if he had never encountered a single word of personal finance advice, he’d be in a similar financial position. There are other people like this in my life; those preternaturally averse to waste, uncompelled by the middle-school-inflected norms that say it’s embarrassing to wear the same clothes over and over. It’s not that they’re better at actively resisting the clarion call of Friday night takeout or the Saturday afternoon shopping, it’s that they don’t seem to feel the tug to begin with.

Anyone who knows this type of person knows these tendencies can tip into an unnecessary and irrational narrowing of possibility, but more often than not their lives just seem to contain less static. I’m envious of this disposition. I’ve always, shamefully, been susceptible to status symbols and shortcuts. I don’t know what this says about the frailty of my ego but I’m sure it isn’t flattering. The success of my ultra-frugal years was the result of an effortful and focused channeling of this monastic identity, but the moment I earned enough to unlace the fiscal corset without nuking my financial future, I was again skipping around Neiman Marcus, topless and free.

The cyclical calls for more financial literacy, then, are a bit of a red herring. That doesn’t mean it’s a conspiracy. It’s hard to imagine people like Lusardi and Mitchell maniacally rubbing their hands together, plotting all the ways their quizzes about revolving lines of credit will distract the indebted masses from recognizing their shared interest in toppling Big Credit Card, busying themselves instead with payoff calculators and the envelope method. Rather than the reeducation arm of United Health Group, it’s just the (mostly) ineffectual weapon we dole out for the grand perpetual battle with American culture and its attendant financial system, not unlike entering the Colosseum armed with a Crazy Straw.

The personality type most adept at reasonably navigating a globalized, financialized economy, then, is the one least titillated by all the stuff engineered specifically to titillate—which is to say that there technically is an individual solution to some of these systemic realities, and it has virtually nothing to do with personal finance. Unfortunately, these are not traits that can be easily taught to high schoolers. Some people, for whatever reason, develop antibodies to the cultural principles the rest of us dutifully internalize, then reproduce and export.

In my experience these folks tend to feel a little superior about all of this. They mostly deserve to.

Thanks for reading.

• I hung on every word of this surrogacy feature. The way your sense of who’s the villain and who’s the victim keeps shifting throughout kept me locked in. (The Cut)

• Unfortunately, I also want this rich woman’s divorce memoir. Commenters bemoaning that the Journal’s highlighting of the absurdity of hedge fund wealth will “inform a lot of recruiting commercials for the DSA” had me giggling and kicking my feet. (Wall Street Journal)

• Randomly stumbled across this piece of media criticism from 2020 called “This Brand is Late Capitalism” that I had to read through my hands because I feared it was going to incinerate my entire intellectual project. Fortunately I think I’ve only crept close to committing this apparent faux pas once, with my 2025 essay “The Venture Capitalization of Culture.” In my (unwarranted) defense, that essay was more about how the only true “innovation” wrought by the 2010s DTC brands was the inescapability of subscription-style pricing, but it certainly had the same mouthfeel, Sweetgreen references and all. Time to revisit this one? (The Baffler)

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1. One of the most treasured metrics of financial health in personal finance—the savings rate—is at historic lows. Until roughly 1985, the average consistently bobbled at or above 10%. As of July 2026, it’s 3%.

2. Here’s mine!

3. When it comes to issues like “financial fragility” or the ability to save for emergencies or retirement investing, the “income” coefficient had a statistical impact 11 to 37 times greater than each additional correct answer.

4. A relevant excerpt from a 2014 metastudy:

"We find that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. [...] We conduct three empirical studies and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies."

5. I think a distrust of these modern ephemera represents a rare and interesting area of overlap between conservative ideals and leftist ones, but that’s a story for another day.

6. In this respect, it’s sort of difficult to cast the much-maligned Dave Ramsey as a straightforward “financial literacy” teacher in the traditional sense, considering the ins and outs of debt management are major components and his advice is to avoid debt altogether. There’s something about his approach that reminds me of the abstinence-only trend in sexual education.

7. The system, in this case, could be the convoluted lending environment, the real estate lobby, home ownership propaganda writ large, etc. Point is, if there are expensive surprises, your being caught flatfooted was probably intentional.

8. In his case, neither nature nor nurture offers an explanation. My brother-in-law is the second-oldest of four boys; his three brothers share the same genetics and were raised in the same home by the same people. He’s the only one whose chemical makeup seems ordered in this way.