Why Equitable Access to High School Personal Finance Education Is Needed in America

Financial literacy is linked to positive outcomes, like wealth accumulation, stock market participation, effective retirement planning, and avoiding high-cost alternative financial services. Conversely, poor financial literacy and negative financial behaviors often go hand in hand.

A fantastic annual report/survey that highlights the connection between financial literacy knowledge and personal finance behaviors has been issued every year since 2017 by the Global Financial Literacy Excellence Center at Stanford University: The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index). Its press release for the 2023 report does a great job of summarizing this connection based on its in-depth national adult survey:

“Financial literacy matters: American workers with a very low level of financial literacy are twice as likely to have decreased their retirement savings and more than 4 times as likely to have stopped saving for retirement compared to their peers with very high levels of financial literacy.

Further, overall, compared to those with a very high level of financial literacy, those with a very low level of financial literacy are:

• More than 4 times as likely to typically have difficulty making ends meet (44% vs 10%).
• Nearly 3 times as likely to be debt constrained (34% vs 12%).
• More than 4 times as likely to lack emergency savings sufficient to cover one month of living expenses (56% vs 13%).
• More than 3 times as likely to spend at least 10 hours a week coping with issues related to personal finances (32% vs 10%).”

We live in a country with increasing income inequality and systemic disparities. Addressing racial equity is required for the progress of our society. One crucial step toward achieving this goal is to ensure that all students have equal and guaranteed access to a stand-alone personal finance course in high school and that it is a graduation requirement.

All too often, students from underprivileged backgrounds enter adulthood with insufficient knowledge of personal finance, which continues the cycle of poverty and inequality. To help address racial inequities, we should give all students the tools they need to make informed financial decisions. Many educators agree with this sentiment. NEA Today (the teachers’ union flagship publication) recently published an article that notes that personal finance education in our nation’s classrooms can “chip away at racial wealth gaps.” Racial equity in personal finance education has become a high priority for the NAACP, which issued a 2020 resolution to support more financial literacy in K to 12 schools in order “to close the financial literacy gap for the African American Community.”

Next Gen Personal Finance (NGPF) commissioned research from Dr. Carly Urban that looked at course catalogs from 12,588 public high schools serving 12,488,245 high school students nationwide. The 2023 NGPF study notes that in states that do not mandate a personal finance course as a graduation requirement and leave such decisions up to local school district control, troubling racial and income disparities appear.

In such states without this requirement, the predominantly minority high schools have only a 7% chance of being locally required to take such a course. Meanwhile, predominantly white high schools are more than twice as likely to have such a local graduation requirement (14.2%). The statistics are similar when looking at high school income levels. Predominantly rich schools are more than twice as likely as predominantly poor schools to have such a local school district graduation requirement (11.4% versus 4.6%, respectively).

Requiring all high school students to take a financial literacy course, regardless of their race, ethnicity, or economic status, is an important step toward reducing inequality. High school graduates with a strong foundation in personal finance concepts will have the tools they need to make informed decisions about saving, investing, and managing debt. These important skills should help students break the cycle of poverty and narrow persistent income and wealth gaps.

Predatory lending practices disproportionately affect communities of color. Financial literacy education can help students avoid these exploitative financial practices, such as payday loans, title loans, pawn shops, rent-to-own stores, and other high-interest lending practices. By teaching students about the dangers of these financial products, we can reduce the number of marginalized individuals who become victims of these predatory practices.

Financially capable high school graduates have a better chance of achieving financial stability in the future. Financial literacy education in our nation’s high schools not only benefits the students but can also increase the economic health of our nation.

For a detailed discussion on the racial and ethnic differences in financial literacy knowledge and behaviors, please see the article on page 11 of the full downloadable PDF report entitled “Racial and Ethnic Disparities in Financial Capability” authored by Angela Fontes, Hanna Gilmore, Gary Mottola, and Olivia Valdes.