Personal finance education should start early at both home and school. Ideally, personal finance concepts should be taught in elementary, middle and high school, and should continue into college. In mathematics, you start with counting, move on to addition and subtraction, and then move on to division and multiplication. You need to learn letters before you can read. Personal finance education should be a cumulative process, with age-appropriate topics taught each school year. The reality is that many states and school districts do not provide any substantive personal finance education until high school, if at all.
The basics of personal financial planning-teaching young people about money, its value, how to save, invest and spend, and how not to waste it-should be taught in school as early as elementary school. But too many school districts teach personal finance for the first and only time in high school.
According to the National Center for Education Statistics, in 2015, 69% of students enrolled in college in the fall immediately following high school completion.1 That means that about 31% of students are likely entering the workforce after high school. For those graduates who choose to go on to higher education, personal finance education in college is often scant and scattered, with few colleges offering a personal finance elective and even fewer requiring personal finance instruction as a graduation requirement. Regardless of when a young person’s formal education ends, they will be thrust into situations where they need to know how to manage daily living expenses. So, high school seems like the best and most logical place to deliver personal finance education to America’s youth.
Admittedly, a high school focus could omit some of the students who have dropped out of high school. The National Center for Education Statistics indicates that the high school dropout rate (the percentage of people ages 16 through 24 who are not enrolled in school and have not earned a high school credential) was about 6% in 2015.2
The Center’s High School Report Card focuses on each state’s financial literacy education policy because that data is obtainable. It is very hard to measure the amount and intensity of personal finance instruction that is occurring in people’s homes, and meaningful data on this topic is hard to obtain for the thousands of elementary and middle schools across the country. Definitive college data is equally hard to find in this area. However, a lot of great things are happening in our colleges and universities as well as our elementary and middle schools. In the section of this report entitled “Extra Credit: State Policies and Programs That Are Making a Difference,” we attempt to give you a small sampling of the many state initiatives that are trying to bring personal finance concepts to K-8 children and to young adults in college or the workplace.
Personal finance education in high school provides students with the knowledge and skills to manage financial resources effectively for a lifetime of financial well-being. Here are just some of the reasons our young people need to learn about personal finance:
Financial literacy leads to better personal finance behavior. There are a variety of studies that indicate that individuals with higher levels of financial literacy make better personal finance decisions. Those who are financially illiterate are less likely to have a checking account, rainy day emergency fund or retirement plan, or to own stocks. They are also more likely to use payday loans, pay only the minimum amount owed on their credit cards, have high-cost mortgages, and have higher debt and credit delinquency levels.
As a society, we need more training programs that increase the number of financially literate citizens who are able to make better and wiser financial decisions in their own lives. Such programs are not just good for the individual but also helpful to society. The 2008 financial crisis clearly shows that poor financial decisions by individuals had negative consequences on our country.
The good news is that studies indicate that financial literacy educational interventions in high school appear to have a positive impact on knowledge and measurable financial behaviors:
As former President Bill Clinton stated, financial literacy is “a very fancy term for saying spend it smart, don’t blow it, save what you can and know how the economy works.”12 Financial literacy, just like reading, writing and arithmetic, builds human capital by empowering individuals with the ability to create personal wealth to buy a home, go to college, have a rainy day and retirement fund.
We would not allow a young person to get in the driver’s seat of a car without requiring driver’s education, and yet we allow our youth to enter the complex financial world without any related education. An uneducated individual armed with a credit card, a student loan and access to a mortgage can be nearly as dangerous to themselves and their community as a person with no training behind the wheel of a car.
1 – U.S. Department of Education, National Center for Education Statistics and the Institute of Education Sciences. “Fast Facts, Back to School Statistics.” https://nces.ed.gov/fastfacts/display.asp?id=372.
2 – U.S. Department of Education, National Center for Education Statistics and the Institute of Education Sciences. “Fast Facts, Dropout Rates.” https://nces.ed.gov/fastfacts/display.asp?id=16.
3 – T. Rowe Price. “Parents, Kids & Money Survey.” http://www.moneyconfidentkids.com/content/money-confident-kids/en/us/media/research/2017-parents–kids—money-survey-results.html.
4 – Organisation of Economic Co-operation and Development (OECD). PISA 2015 Results: “Students and Money: Students Financial Literacy (Volume IV).” PISA, OECD Publishing. http://www.keepeek.com/Digital-Asset-Management/oecd/education/pisa-2015-results-volume-iv_9789264270282-en#.WeUF0ltSyUk.
5 – Bank of America/USA TODAY Better Money Habits Report, “Young Americans & Money, Fall 2016.” https://about.bankofamerica.com/assets/pdf/BOA_BMH_2016-REPORT-v5.pdf.
6 – The Institute for College Access & Success. “Student Debt and the Class of 2016.” https://ticas.org/sites/default/files/pub_files/classof2016.pdf.
7 – U.S. Department of Education, Federal Student Aid. “Official Cohort Default Rate for Schools.” https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.
8 – Mottola, Gary. “The Financial Capability of Young Adults-A Generational View.” FINRA Foundation Financial Capability Insights. http://www.usfinancialcapability.org/downloads/FinancialCapabilityofYoungAdults.pdf.
9 – Brown, Collins, Schmeiser, and Urban, 2014. “State Mandated Financial Education and the Credit Behavior of YoungAdults.” https://www.federalreserve.gov/pubs/feds/2014/201468/201468pap.pdf.
10 – Asarta, Hill, and Meszaros, 2014. “The features and effectiveness of the Keys to Financial Success curriculum.” http://nebula.wsimg.com/7c3014715076f1f6a49caa6f4b6af123?AccessKeyId=27E1C5C94AE9959DA340&disposition=0&alloworigin=1.
11 – Champlain College’s Center for Financial Literacy, 2015. “Prepped for Success, A Study of Teacher Training, Financial Literacy & Classroom Outcomes.” https://www.champlain.edu/centers-of-excellence/center-for-financial-literacy/report-prepped-for-success.
12 – Klein, Asher and Giordano, Jackie. “Bill Clinton Visits USC to Teach Kids Value of Financial Literacy.” Channel 4, Southern California. http://www.nbclosangeles.com/news/local/Bill-Clinton-Visits-USC-to-Host-Financial-Literacy-Event-282070241.html.
The Case for High School Financial LiteracyResults SummaryKeys to SuccessRating Method