By Charles Bowles
The lack of personal financial education is a major failure on the part of the American K-12 education system, especially in an increasingly uncertain financial environment. We owe much more to American students.
According to the Council of Economic Education (CEE) 2016 Survey of the States, only five states require a standalone semester course in personal finance. This is a failure as students are falling further into debt to meet the demands of a globalized economy. According to the Federal Reserve, there is $1.4 trillion in U.S. student loan debt and over 44 million Americans with student loan debt.
I know, talking about personal finances is taboo, but we owe it to students to demystify the world of finance. We speak about the “American Dream,”but fundamentally fail to teach students the mechanisms to achieve that “dream.”
I know from personal experience. I worked for the Credit Abuse Resistance Education (CARE) program in the Washington DC area and would teach high school students who would not otherwise receive this education in their classes about budgeting, credit cards, and student loans. Students would be very interested in the topics that we lectured and wanted to continue the conversation. The key for us was to provide an initial spark of interest in their finances.
When our organization would get post-seminar feedback from students, they would talk about how relevant it was to them. Seniors in high school would be particularly interested in our presentations due to college decisions and other financial responsibilities they would be taking on soon. Our organization provided an opportunity for students to learn lifelong financial skills and provided them tools to control their financial future.
I found that students were very interested in their personal finances and wanted to learn more about them. They were very appreciative of our work. However, there’s a disconnect with what I have seen on the ground and the implementation of that into a school’s curriculum.
The 2016 CEE survey said “there had been no significant improvement in economic education in recent years and slow growth in personal finance education.” There are wide variations on what personal finance curriculum is offered to students. Each state has its own guidelines for teaching personal finance, but states that have implemented strong personal finance standards (i.e. integrating personal finance topics into math and economics course) have seen results.
- Michael Collins, Director for the Center for Financial Security, found that three states who implemented strong personal finances standards in 2007 saw students’ credit scores increase 8 to 17 points by their time they were 22-years-old. In addition, Collins’ research found that those who had more rigorous personal finance standards were more likely to make on-time payments and track their bills.
Virginia is one such state. The state integrates economic and personal finance in each grade and students are required to take a standalone personal finance course while they are in high school. The state has set the standard for teaching personal finance and become a model for other states.
Some states have realized the importance of implementing strong personal finance standards into their curriculum. So, what is the hold up with other states not implementing stronger personal finance standards?
Most of it has to do with a lack of funding to implement new curriculum and potentially adding additional requirements to graduate. State education budgets are stretched thin and trying to add requirements could be seen as an undue cost on an already strained system. While making personal finance a requirement could be challenging, there are ways to integrate it into math and other pre-existing requirements, as Virginia and other states have done.
States must recognize the long-term value they provide their students if they are prepared with tools to help build their financial future. An increase in credit scores from states who have implemented strong personal finance standards can save students thousands of dollars in the future. We owe it to these students to provide them with the tools to deal with financial matters, as finance will only become more complex as they grow older and face responsibilities like student loans, mortgages or starting a business.
I recognize that formalized education is not the only way to make someone more financially literate, but we need to provide every student an opportunity to learn these skills now before it’s too late. Students will make mistakes and educational standards alone are not foolproof, but more must be done in an increasingly uncertain financial world.