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Achieving financial literacy is essential to thriving or even functioning in today’s world, but its fundamentals are clearly not being passed along equally to all Americans.
These are the basics of personal finance, budgeting, and investing. Once they’re grasped, an individual can make ends meet, invest for the future, take care of a family, manage debt, and make good decisions.
Yet, according to national surveys, basic financial literacy is generally low in the United States, and it is significantly lower for members of some racial and ethnic groups.
Key Takeaways
- Financial literacy is the possession of the basic skills needed to manage an income, keep debts in control, spend wisely, and invest for the future.
- The near-universal access to credit and debit cards, mortgages, and student loans has made financial literacy more difficult to achieve, and more important to have.
- There’s a disparity in the rates of financial literacy across racial and ethnic groups in the United States, with Black, Hispanic, and Native American populations tending to have lower rates of financial literacy than White and Asian populations.
- Financial literacy is bound up with the structural factors that drive the racial wealth gap in the U.S.
What Does the Data Say?
The latest update of a study by the Financial Industry Regulatory Authority (FINRA), released in mid-2025, found that overall financial literacy among American adults is holding steady but low. When it tested survey respondents with five basic questions about money, only 32% of respondents could answer four questions correctly in 2024—the same as in 2021, but down 10% from 2014.
In general, the decline in scores was most pronounced among adults ages 35 and younger.
And the research found there was a clear correlation between living through higher inflation and understanding how that affects purchasing power.
Financial Literacy
When categorized by racial or ethnic group, the 2025 data suggest that financial literacy rates are not evenly dispersed, with Asian-American and White test takers tending to score higher than Hispanic and Black test takers.
An earlier installment of the FINRA study, released in 2018, reported that Asian and White Americans were able to correctly answer 3.2 out of six questions meant to assess basic financial literacy, while Hispanic Americans were able to answer 2.6 and Black Americans 2.3. Both scores are below the national average.
The gap can be seen early in life. For instance, the latest Program for International Student Assessment (PISA) Financial Literacy Results data, published in 2022, shows that White and Asian 15-year-olds have much higher financial literacy rates than Black and Hispanic populations of the same age.
Economic Well-Being
There are also racial differences in economic well-being. The latest survey data on unbanked and underbanked Americans from the Federal Deposit Insurance Corp. (FDIC) reveals that the percentage of Americans who don’t use banking services, and thus are deemed “unbanked,” has declined to single digits.
However, it also revealed that American Indian and Alaska Native, Black, and Hispanic households are more prone to rely on bill payment services, money orders, and check cashing services, which are often related to financial insecurity and a lack of access to basic bank services.
Native American communities in particular suffer from higher levels of financial fragility and distress than most other racial and ethnic groups. They have roughly the same financial literacy rate as Black and Hispanic populations, which is lower than that of White and Asian American populations.
Tip
Did you know the Federal Reserve publishes comic books for kids? They’re just one of many resources available to parents who want to introduce their children to money matters at an early age.
Making Ends Meet
The overall picture, especially in this broader context, can be complicated regarding Americans’ ability to cover costs with savings and unexpectedly lost income, when tilted by race.
In 2024, the Federal Reserve reported that 69% of Asian Americans and 60% of White Americans had savings to cover three months of expenses, compared with 44% of Hispanics and 41% of Black Americans.
Also in 2024, the Consumer Financial Protection Bureau (CFPB) reported that 35% of White households could cover expenses for a month or less without a main source of income, compared with 65% of Black households, 55% of Hispanic households, and 35% of households of Asian Americans and other races/ethnicities.
Why Does the Racial Financial Literacy Gap Exist?
For most Americans, basic financial literacy comes from as many as five sources: family, high school, college, employers, and the military.
Studies of the national survey data say that education and household income are the two biggest factors in predicting whether someone has a high level of financial literacy.
Socioeconomic and Political Barriers
Traditional accounts have laid some of the blame for financial illiteracy on a lack of parental guidance and poor decision making. However, recent studies point to socioeconomic and political barriers. In other words, from their earliest years, members of minority groups are channeled into using predatory financial services and denied access to basic financial education.
The Gender Gap
Explanation of the gender gap in financial skills focuses, in part, on the tendency of men to have more financial experience and education than women. A similar dynamic may be at play in the racial gap, abetted by structural barriers, as minorities may have less access to wealth, higher rates of unemployment, and lower quality education.
Analysis of the reasons why Native American communities in the U.S. lag behind White Americans in financial literacy, for example, points toward historical injustices—the legacy of which is high rates of poverty and unemployment, as well as other barriers that impact the broad concept of economic well-being.
This specific blend of factors has left Native American populations with few opportunities to build financial skills, as well as few family sources of knowledge.
MyMoney.gov
The U.S. Treasury Department has developed a website, MyMoney.gov, with information, videos, and games that can help children, teenagers, and young adults learn about money.
Other Issues
Lack of financial literacy is not just a matter of insufficient parental guidance. A complex recent study of the persistence of the racial gap in financial literacy reported that the gap lingers even with equal access to financial literacy education and that the positive impacts of parental dissemination of financial knowledge depreciate faster for minority groups than for the White population.
On the other hand, members of minority groups in the study benefited as much as White students from high school and employer education on finances.
Why Does Financial Literacy Matter?
Financial literacy has a clear impact on financial well-being. The U.S. Financial Literacy and Education Commission—the federal body that makes recommendations for increasing financial literacy and education—describes financial literacy as foundational for full participation in the market. The commission says it is vital to the foundations of economic opportunity at the individual level.
As the use of credit cards, mortgages, and student loans has become more common, financial literacy has become more crucial because it correlates to a person’s ability to navigate increasingly complex financial services successfully. People without financial knowledge risk falling behind.
Among other benefits, financial literacy decreases vulnerability to fraud and increases the likelihood of acquiring wealth over time. High financial literacy scores are key to retirement planning, which is a key component of household wealth.
The financial literacy gap also influences other notable metrics, such as the racial wealth gap, which is the measure of wealth held by different races in the U.S.
Closing the Gap
There are a number of public and private proposals for narrowing the racial gap in financial literacy.
In 2020, the U.S. Financial Literacy and Education Commission proposed a set of changes to improve financial literacy in the country. It recommended establishing clear guidelines for financial educators, opening access to one-on-one financial counseling, and consistently measuring the results.
The report emphasized the importance of tailoring financial literacy to the people and communities in need of education, which it says helps in key areas such as building motivation to learn financial tools. In particular, the commission focused on the role of financial literacy in a robust economic recovery.
The COVID-19 pandemic highlighted both inequality and the vulnerability of some minority populations. Of particular note was the vulnerability of at-risk populations to scams and their need for information about economic impact payments and unemployment insurance benefits, and about managing debt and surviving hardship.
In 2025, the commission will “conduct a comprehensive review” of the proposed changes and “propose appropriate updates and amendments as needed.”
Government Resources
The federal government funds many of the available resources to improve financial literacy.
Digital literacy programs are sometimes connected to advocacy organizations positioned to target them to the communities most in need.
For example, the Native American Financial Services Association (NAFSA), a national, Native American-focused financial services association, sponsors a digital literacy program.
Why Is Financial Literacy Important?
Financial literacy refers to a person’s ability to make sound financial decisions from day to day as well as to plan for the future. Without it, people struggle to make ends meet, plan their finances, and achieve economic well-being.
Moreover, those who are not financially savvy are most often targeted by scam artists and by marketers of moneymaking schemes that are just this side of illegal. Like computer literacy, financial literacy is increasingly needed to avoid bad actors.
Who Needs Financial Literacy?
Everyone. Increasingly, people are expected to understand and make decisions in a complex financial environment. That includes using credit cards, obtaining loans, investing money, and planning for retirement.
How Do I Acquire Financial Literacy?
A good place to start is by examining what’s included in the National Financial Capability Study. The study tests what’s considered basic financial literacy. To test your knowledge, try FINRA’s quiz. Then, focus on areas where your answers proved to be wrong.
The Bottom Line
If you look for the causes of the wealth gap, one major answer lies in unequal access to basic financial education. Financial literacy is obtained over time from one’s family, high school, and employer. Studies show that minorities and women are more likely than others to lack the background they need to cope with an increasingly complex world.
Luckily, resources are out there, many of them funded by the federal government and by nonprofit groups. A good place to start might be an online financial literacy test such as the one developed by FINRA. Then, follow up by exploring some of the online resources available to everyone who wants to make smarter financial decisions.
