What Is Financial Literacy and Why Is It Important

What Is Financial Literacy and Why Is It Important?

Many states are considering ways to help Americans of all ages do better with their money.

At least 25 states have some version of a financial literacy or education requirement for high school graduation. (Photo by Allison Shelley/The Verbatim Age)

April is Financial Literacy Month-something research shows Americans consistently lack.

A yearly index conducted by the TIAA Institute and Stanford University's Global Financial Literacy Excellence Center, or GFLEC, shows that financial literacy has remained low among U.S. adults over the last nine years. The survey asks 28 questions that cover earning, consuming, saving, investing, borrowing and managing debt, insuring, comprehending risk and go-to information sources. In 2025, respondents answered 49% of questions correctly-a percentage that has barely budged in the last decade.

According to the Office of the Comptroller of the Currency, financial literacy refers to the skills, knowledge and tools that equip people to make individual financial decisions and actions to obtain their goals. Financial literacy falls under the broader categories "financial capability," which includes access to financial products and services, and "financial health," enabling day-to-day stability, resilience in adverse circumstances and security for the future.

Low financial literacy concerns policymakers because it affects financial well-being and financial health. For example, the TIAA Institute-GFLEC Index found that respondents with very low levels of financial literacy are twice as likely to be debt-constrained and five times more likely to lack or be unsure whether they have nonretirement savings sufficient to cover one month of living expenses.

Many states are looking for ways to increase financial literacy across all ages. Bills in the current legislative session target financial literacy for K-12 students, foster youth, college athletes and adults.

K-12 Requirements

At least 25 states have some version of a financial literacy or education requirement for high school graduation. This year, at least six states are considering legislation that would create new requirements for financial literacy education among K-12 students.

• Alaska (HB 90, HB 339, and SB 22) would require each school district to establish a financial literacy education program for grades nine through 12, including instruction on budgeting, spending, credit, debt, taxes, retirement and more. Completion of the program would be required for graduation starting in 2027.
• Hawaii (HB 865and SB 605) would require instruction in financial literacy for kindergarten through grade 12. Students in kindergarten through grade eight would receive instruction on credit and credit cards, borrowing money, home mortgages and more; students in grades nine through 12 would learn about planning and paying for postsecondary education. Passing one half-credit course in financial literacy would be required for graduation for high school students beginning with the 2026-27 school year.
• Massachusetts (SB 2988) would require students in grades 11 or 12 to complete a semester-long course in personal finance that includes an experiential component. The course would include instruction on earning and spending income, taxes, charitable giving, consumer protection, credit and more, and would begin in the 2026-27 school year.

Foster Youth

Seven states are considering some 15 bills on foster youth and financial literacy; most of the proposals would require some sort of financial literacy education for foster youth once they have reached 14.

• Michigan(HB 4750) would require the Department of Health and Human Services to provide children over age 14 in foster care with financial literacy training that includes personal finance, career aptitude, postsecondary education financing, money borrowing and student loans, take-home pay, savings and spending plans, financial institutions, credit and more.
• Minnesota (SB 3154) would establish a Foster Youth Bill of Rights that creates the right to receive appropriate resources to meet the objectives of the foster youth's independent living plan, including financial literacy resources.
• New York(AB 8036 and SB 7778) would require commissioners of local social services districts to provide at least five hours annually of developmentally appropriate financial literacy and skill building, including on proper use and conservation of benefits, for all children age 14 and older and for family members who will serve as a representative payee for the child.

College Athletes

Many states recognize that student-athletes who enter name, image and likeness, or NIL, agreements may benefit from additional financial literacy education. At least four states are considering bills on financial literacy for college athletes participating in NIL contracts.

• Louisiana (HB 513) would require postsecondary institutions to offer students educational workshops and resources on financial literacy training, life-skills education and resources related to financial responsibility.
• Massachusetts (HB 1930) would require institutions to provide annual training for student-athletes on topics including financial literacy and tax compliance.

Adults

States are considering bills on financial literacy for adults in a variety of contexts, from wrongful convictions to rental assistance to workforce development.

• Missouri(HB 2966 and SB 1170) would include financial literacy assistance as part of the compensation that can be awarded to individuals who were wrongfully convicted.
• Arizona (HB 2682) would require the Department of Economic Security to establish a free financial literacy class for tenants requesting rental assistance.
• Vermont (HB 772) would require the state treasurer, via a third-party contractor, to offer an optional financial education course for tenants who participate in a positive rental payment pilot program as an alternative way to establish credit history.
• New Jersey (SB 2846) would establish a school readiness and workforce development pilot program that serves two generations in one household and would include financial literacy as part of the program.

Olivia Parker is an intern in NCSL's Fiscal Affairs Program.