Hypothetical: What if 80% of Americans were financially literate

[elessar78]

What would our economy be like if 80% of the people in the US followed the basic principles? Would we boom or would the economy be stagnant from lack of consumerism? If it's the latter, then would those who are financially sound want what we have now? Or, if we had a country full of surplus cash would industry take off as we'd have an overabundance of investors and capital? Or would it be like Apple? Billions of dollars in cash and no where worthy to invest it?

[UnknownXV]

Economy would grow much slower, but it would be far, far more stable.

I find this a much better plan. Honestly, I don't get why the world is in such a rush. Slow the hell down, at least to a point where the economy can handle it. the economy we've built is on consumerism but, more dangerously, on debt.

[MakeAStash]

Better financial literacy would mean less waste and more efficiency. Lather, rinse, repeat that over time and it produces a higher standard of living.

[RickLeibo]

End of our economy

A more realistic question would be what if 20% were? If 80% were then our economy would absolutely be stagnant.

[GrimJack]

At the very least, high schools should teach seniors about rent, bills, income, saving, and spending. When I was studying to be a sign language interpreter, we took a trip to Vancouver where there was a high school for deaf student. Their senior year they were taught about handling money by setting up an entire system including bills, rent, income, savings accounts, et c. (on paper) and had them track it all to graduation. They graduated from high school knowing what took me 15 years to learn (and am still learning).

It is not a complete solution but dang - it sure would help.

[disneysteve]

What would our economy be like if 80% of the people in the US followed the basic principles? Would we boom or would the economy be stagnant from lack of consumerism? If it's the latter, then would those who are financially sound want what we have now? Or, if we had a country full of surplus cash would industry take off as we'd have an overabundance of investors and capital? Or would it be like Apple? Billions of dollars in cash and no where worthy to invest it?

Great question!

I don't think the economy would stagnate due to lack of consumerism. Being financially literate or savvy doesn't mean you aren't a consumer. It just means you are a smarter consumer. My wife, daughter, and I spend plenty of money. We are just careful about how and where we spend it. We don't, for example, buy a bunch of cheap crap that doesn't hold up and has to be replaced every couple of years. We look for quality and value. As a result of more careful shopping for things, we also have more money available to spend on experiential purchases - theater tickets, travel, dining out, etc. So I think where and how money gets spent would shift.

People saving and investing more would also benefit the economy. First off, it would benefit the financial services sector. Secondly, it would decrease government spending because it would reduce the demands on the welfare system. If people took more responsibility for their own finances, they wouldn't need to depend as much, if at all, on government aid. Instead, the government could spend more on things like infrastructure that would increase employment and benefit everyone.

[phantom]

If larges numbers of financially illiterate people were to become financially literate, I think the economy would take a hit while people stopped spending while they dug themselves out of debt and saved up for purchases. But, assuming the shift happened gradually, I think most industries would be just fine. Payday lenders, reverse mortgage brokers, and whole life insurance agents might find themselves looking for new lines of work. But, I think, in general, markets would adjust to the shift in spending patterns just fine.

[disneysteve]

Payday lenders, reverse mortgage brokers, and whole life insurance agents might find themselves looking for new lines of work.

Good point. Certain industries might suffer or disappear all together, but that wouldn't be a bad thing in the long run. A lot of that nonsense only came to exist relatively recently after Congress changed the usury laws.

[EEinNJ]

If most people were financially literate, there are lots of industries and "products" that would dry up. Predatory lending, credit cards, used car financing, etc. If people got to keep more of their own money, there would be less of a gap between rich and poor. Economic exploitation thrives on ignorance and greed.

Our modern US consumer culture isn't much over 100 years old. Credit cards and mortgages are modern "inventions". But greed and poverty have existed as long as civilization.

[bjl584]

Overall I think that things would be better and more stable.

Certain industries that currently exist would go away like payday lenders, but time marches on. Economies are always changing and evolving.

[disneysteve]

If most people were financially literate, there are lots of industries and "products" that would dry up. Predatory lending, credit cards

Do you really think credit cards would go away? They might change. The rewards programs might get less generous. But I don't think they'd disappear. They do still make money on every single transaction even if you pay your bill in full every month.

[p_wyt_12]

Being financially literate results in better financial condition but of course this should come with action. In some ways, it may help indirectly on having a good economy.

[UnknownXV]

I think the main point though, is that an economy that would only function well if the majority of people in this economy are financially stupid, is a very poorly designed economy indeed.