Many of you reading this have probably ventured down the online or mobile video rabbit hole—watching a video on your favorite website or app, which leads to binge watching. While not nearly as entertaining, I spent the better part of a recent day down the rabbit hole of banking and payments research. Having initially embarked on researching the un- and underbanked, cash usage, and prohibitions on cash bans by municipalities or governments, I was drawn to the topic of financial literacy—or, more shockingly, the lack of financial literacy in this country.
According to the 2018 FINRA Foundation's National Financial Capability Study 
(see pages 33–40), the U.S. financial literacy rate decreased from 42 percent in 2009 to 34 percent in 2018. This rate is based on the results of survey respondents' ability to correctly answer a series of five questions, plus one bonus question that requires a complex calculation, covering fundamental concepts of economics and personal finances. You can take the quiz here.
You can find a lot of material on the ability (or lack of ability) of financial institutions and other financial service providers to provide basic services such as deposits and payments to those considered un- or underbanked. A recent paper by my colleagues at the Atlanta Fed suggests that "instead of focusing on helping these people (the unbanked or underbanked) become banked to increase financial inclusion, a more effective approach could be giving cash users access to digital payment vehicles that don't depend on traditional banking accounts."
I would suggest a different path. No doubt, multiple factors are at play, including access challenges, in keeping 7.1 million U.S. households (or 5.4 percent of the total population) unbanked and perhaps at risk of being left behind when it comes to digital payments. But how can those who are not financially literate make educated decisions on what financial services and products are best for them? Maybe the banks that can serve them are out there, but a lack of financial literacy keeps these people from understanding exactly how those banks can meet their needs. For example, can they compare the cost of maintaining a checking account and using a debit card to the cost of using a prepaid card and cash (which they could obtain through a check cashing service)?
It's time to focus efforts on teaching financial literacy in the United States through our education system. The Federal Reserve Bank of Atlanta recognizes the importance of financial literacy and offers the public and educational system numerous resources. Just as students must demonstrate proficiency in other basic courses, every high school student should be required to successfully complete a standalone course on personal finance to graduate. It's not enough to embed financial education in another class, such as consumer math. Currently, only six states—including Tennessee and Alabama, both in the Sixth District—require a standalone class, but it's high time for the rest to join.
Are you in favor of this idea?
By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed