Supporting Financial Literacy and Wellness

What is financial literacy?

Financial literacy is a working knowledge of money-related concepts and skills. At the everyday level, this includes, for example, the ability to create and manage a household budget, maintain checking and savings accounts, understand compound interest—how money grows over time—along with credit, debt, interest rates, and personal insurance products. Financial literacy also encompasses the knowledge necessary for longer-term financial strategy—like investing, student loan borrowing, planning to purchase a home, and saving for retirement.

Although everyone needs money in our society, not everyone knows how to use it effectively. According to the World Economic Forum, financial literacy in the U.S. has hovered around 50% for the better part of a decade, according to an annual survey.¹

Why is financial literacy important?

Just as traditional literacy—the ability to read and write—is a major determinant of success in life, financial literacy is shown to have “significant predictive power” over future financial outcomes.² Financially literate individuals are more likely to spend less than they earn, save for the future, and make other choices that help prevent against what FINRA (the Financial Industry Regulatory Authority) terms “financial fragility.”³

Beyond dollars and cents, some research draws connections among financial wellness, mental, and physical health.⁴ Financial stress may negatively affect a person’s wellbeing—especially for those in younger age groups, according to the FINRA Foundation’s National Financial Capability Study.⁵ Sixty-nine percent of respondents aged 18-34 reported that their personal finances are a source of anxiety. More than half think about money—in an unhappy way—at least once a day.

The demographics of financial literacy

Despite the benefits of developing financial literacy, not everyone has the opportunity. For a host of reasons, financial literacy gaps exist between different demographics.⁶ Gender, socioeconomic status, education level, and race can all play a role. According to the National Center for Education Statistics (NCES), Asian and White students have higher financial literacy scores than the overall U.S. average, while Black and Hispanic students’ scores fall below the national average.⁷

Lincoln Financial Group recently released its 2024 Financial Concerns Report, highlighting the different financial concerns across every generation.⁸ While each generation was shown to have unique concerns aligned to their stage of life, one of the common threads uncovered was the concern of dealing with financial crisis, the “what if” scenarios. Gaining the knowledge to plan for and react to financial crises can build financial resilience. Lincoln says it’s committed to helping clients, employees, and communities achieve that goal.

Informing its financial literacy efforts, Vanguard cites an American Council on Consumer Interests study, which reveals that more than half of surveyed college students (52.9%) reported feeling “not at all confident about their knowledge of credit.”⁹ Almost 90% of the sample were either not at all confident (42.3%) or uncertain (46.3%) about their ability to manage credit. 

“Vanguard believes our responsibility as long-term investors extends to the neighborhoods in which we live and work. We are committed to strengthening our communities and beyond,” said A.J. Jordan, head of community stewardship at vanguard. “We support economic inclusion by ensuring that My Classroom Economy is accessible and free of charge. We offer the program in two formats—printed and shipped paper kit and digital experience—so all classrooms, no matter their access to technology, can participate and reap the benefits.”

Company example: Vanguard’s My Classroom Economy

Vanguard started its classroom economy project after an employee’s 10-year-old son, a fourth grader, asked a seemingly simple question during dinner: “I wonder when I'll be able to pay off my mortgage?” Intrigued by the discovery that her son had a classroom mortgage and was earning a paycheck for his classroom job, the Vanguard crew member contacted her son’s teacher. The classroom economy idea offered a way to teach young people not only the concept of financial discipline but also—very importantly—the rewards that go with it.

Vanguard set out to build on those ideas and to make them available, free of charge, to teachers everywhere, knowing that the more help it could provide to educators, the more those educators could do to teach children financial skills that last a lifetime. Vanguard crew members (employees) were invited to donate their time and expertise to the project, and have done so enthusiastically. As a result, My Classroom Economy grew to over 150 Vanguard volunteers serving over 1.2 million students and counting.

So, what exactly is My Classroom Economy?

It’s a free, experiential, supplemental, and adaptive classroom management system that teaches students financial responsibility through real-world application (simulated microeconomy) while enabling teachers to reinforce positive behaviors and deter negative behaviors in their classroom. The program is designed to support students and teachers, from kindergarten through twelfth grade. My Classroom Economy supports financial wellbeing because it provides students hands-on experience with the basic financial concepts of earning, spending, saving, and more complex concepts over time.

The program is uniquely effective thanks to three key characteristics. Firstly, it’s experiential in nature. This means it allows students to learn by doing, which includes practicing behaviors related to financial responsibility and even making mistakes as they go. The program is also supplemental—designed to overlay and complement what teachers are already doing, as opposed to interrupting the existing curriculum. Finally, it’s adaptive. My Classroom Economy can be tailored to fit any grade and all different learning abilities. Teachers can customize the program to meet their unique classroom needs.

For Vanguard, the results of its experiential learning tool are clear. To date, the My Classroom Economy program has been used by over 1.2 million students since its inception in 2011. Research from the University of Wisconsin’s Center for Financial Security revealed that students who participated in the program for 10 weeks improved financial knowledge and budgeting.¹⁰ The digital experience that launched in September of 2023 has reached approximately 7,500 students in all 50 states.

Company example: Lincoln Financial Foundation’s work to build financial literacy and wellness

Lincoln Financial partners with a number of financial health organizations that focus on helping individuals to broadly understand what it means to be financially secure through comprehensive financial coaching. To ensure its grantmaking is meeting the company mission and vision, leaders leverage data and research to understand community challenges and opportunities. They also use data to identify nonprofit partners who are delivering on measurable results in their communities. These organizations track progress on outcomes, use nationally recognized best practices and proven strategies, and strive to continually improve their service delivery and results.

At present, some of the organizations in this group include Local Initiatives Support Corporation (LISC) with their Financial Opportunity Centers in six cities throughout the country, and Clarifi’s Financial Empowerment Centers in Philadelphia. In addition to financial health programs to build financial empowerment and resilience, Lincoln Financial also supports workforce development programming aimed at upskilling, reskilling, and credentialing—to build sustainable career pathways. Partners in this area include Urban Leagues across six cities, and Congreso de Latinos Unidos in Philadelphia.

“Bright financial futures begin with strong foundations,” explained Wright. “To ensure students enter the workforce prepared for financial success, we also support Junior Achievement groups across our footprint to deliver age-appropriate, stackable financial literacy curriculum with hands-on simulations.”

Setting goals and measuring progress towards financial wellness

“We understand that everyone’s path to financial wellness is different, and our goal is to meet people where they are on their journey,” said Meghan Wright, vice president and executive director of the Lincoln Financial Foundation. “For community impact, we work closely with our nonprofit partners to support programs that align with measurable outcomes that move the needle on an individual’s financial capability and resilience. Those include demonstrating knowledge of financial concepts, ability to meet day-to-day expenses, contributions to savings and increased credit score. We are proud that our nonprofit partners report that 81% of program participants in our financial health programming gained additional financial knowledge, resources or coaching to improve their financial resilience. Additionally, 77% of participants enrolled in workforce development programming gained the necessary skills and credentials to attain meaningful employment or advance their career.”

To help bring these stories and outcomes to life, Lincoln Financial partnered with its nonprofit grantees, highlighting the journeys of three individuals on their way to finance wellness. These stories are featured on the Foundation’s website.