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Financial Illiteracy and the Correlation to Mass Incarceration

Financial literacy is much more than retirement accounts and investments; it determines an individual’s overall social well-being in the long term. Social well-being has many layers and facets, but undeniably, nothing would disturb and cross more of those layers than financial stability. When a person is financially stable, he looks at the world differently than someone who is not. This “want” to have that stability or lifestyle, is one of the major reasons why people resort to illegal ways to attain them. The fact is that in a very good percentage of cases, the gap between the people who have that financial stability and the ones who were convicted trying to attain that stability via the wrong means is Financial Literacy. The unfulfilled basic needs and poor management of wealth lead to crimes driven by economic needs.

Less financial education follows more crime. People with inferior financial education and literacy skills find it more difficult to obtain the financial discipline that is required to progress economically. People with modest financial literacy want the same material things as anyone else, but they often can’t afford them. To obtain those things, they turn to crime. The income levels of inmates before incarceration are, on average, 41 percent lower than those who have never been incarcerated (Rabuy, 2015). A 2014 study found that incarcerated people were less likely to have ever had a checking account or credit card, more than twice as likely to take out payday loans, and three times as likely to pawn an item as their non-incarcerated counterparts (Koon, 2014).

This is why it is important to conduct financial literacy programs not only in schools and offices but also in prisons. Prison education programs are one of the most effective ways of reducing recidivism, but these programs are still a hard sell to taxpayers. Financial literacy is not just numbers and returns, it is a lifestyle. It will teach felons the financial ethics that are required to live a socially and financially stable life. Education also intends and succeeds, to varying degrees to teach you about the world you live in. If you lack these financial skills for whatever reason, it makes it more difficult to maintain your housing, your job, and your stability within society. Instead, they’ll be inclined to steal and may be inclined to bully others with force to get what they want or need.

Mind you, this assessment doesn’t consider people who are “criminals” by the fact they were in the wrong place at the wrong time, were victims of some sort of prejudice or fell prey to the complexities of the system. It also doesn’t consider other factors like a person’s upbringing, family stability, preexisting mental conditions, and so on but the negative relation between incarceration and financial literacy is quite evident.

Although financial literacy will not solve all the world’s problems, financial education has bigger benefits to society than we could ever imagine. The ability to earn and manage money properly, combined with healthy attitudes and communication about finances, will reduce our societal stress. Striving for comprehensive financial literacy over a lifetime is a worthwhile goal that will provide benefits for the good of all.

In a 2013 study, inmates cited several barriers to financial services that contribute to their financial illiteracy (Lindsay et al., 2013). These are the very barriers that The Michael’s Daughter Foundation, a non-profit organization, is trying to minimize with its financial literacy programs. The non-profit organization works with families impacted by the incarceration of a loved one and we want to highlight how financial literacy is important in aiding to stop incarceration and also highlight how lack of financial literacy can play a part in the prison cycle


Rabuy B, 2015. Prisons of Poverty: Uncovering the pre-incarceration incomes of the imprisone. Prison policy. Retrieved from

Koon D, 2014. A new UALR survey finds a lack of basic ‘financial literacy’ among inmates. ARK times. Retrieved from

Lindsay Larson Call, W. Justin Dyer, Angela R. Wiley, and Randal D. Day, 2013. Inmate Perceptions of Financial Education Needs: Suggestions for Financial Educators. Journal of Financial Counseling and Planning. Retrieved from


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