Investing in our own financial literacy
April is Financial Literacy Month, and this year it is even more notable as we commemorate 100 years of the Memphis branch of the Federal Reserve Bank of St. Louis.
Since 1918, the work of the Memphis branch has ranged from the facilitation of cotton receipts as collateral, to tendering notes at the discount window, to working to ensure members of the Memphis Zone are financially literate.
Financial literacy is an important investment to a central bank. Economists use the word “investment” to refer to spending on capital, which can be either physical capital, like tools and equipment, or human capital, like education and training.
You can think of human capital as the kinds of things you’d list on a resume: professional development training, work experience, certifications, community and volunteer work, and more.
Why should you invest in yourself? For the same reasons businesses invest in physical capital and individuals invest in financial assets -- for a payoff of more income in the future.
The median weekly earnings in 2016
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for a professional degree holder were $1,745, compared to $1,156 for someone with a bachelor’s degree, and $692 for a person with no more than a high school diploma, according to the Bureau of Labor Statistics. Skilled professions are well paid – the median weekly income in 2016 was $838 for a carpenter and $1,013 for an electrician.
Investments in human capital is a core factor in the Federal Reserve’s dual mandate to seek full employment. That includes financial literacy.
We believe that better understanding of economic concepts and principles will result in better decision-making by consumers. That’s why we created tools to give people information they need to make better financial decisions.
This year we also commemorate the 50th anniversary of the assassination of Dr. Martin Luther King Jr. in Memphis.
His widow, Coretta Scott King, pushed for the 1978 Full Employment and Balanced Growth Act, which legally required the Federal Reserve to pursue maximum employment as part of its dual mandate.
Economic knowledge is part of a person’s basic civic literacy. Being a thinking, voting and productive member of society requires an economic understanding of the world in which we live.
According to a 2018 study by WalletHub, Memphis has room for improvement when it comes to money management, ranking last out of 63 large U.S. cities in 10 key indicators including credit score, average number of late payments and mortgage debtto-income ratio.
The St. Louis Fed provides economic and financial literacy support by providing high-quality lessons, online modules, publications, podcasts, videos and other resources for people of all ages. Using them helps people increase their own human capital.
Visit our award-winning Econ Lowdown program at stlouisfed.org/education and browse through more than 400 lessons, articles and activities to learn more about economics and personal finance.
It’s as true today as it was 100 years ago.
Financial literacy includes knowing that the most important investment you make is in yourself.
Douglas Scarboro is a senior vice president and the regional executive of the Memphis branch of the Federal Reserve Bank of St. Louis.
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