Why High Schools?

The Case for High School Financial Literacy

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:

• The number of financial decisions an individual must make continues to increase, and the variety and complexity of financial products continues to grow. Young people often do not understand debit and credit cards, mortgages, banking, investment and insurance products and services, payday lending, auto title loans, rent-to-own products, credit reports, credit scores, etc.
• Many students do not understand that one of the most important financial decisions they will make in their lives is choosing whether they should go to college after high school, and if they decide to pursue additional education, what field to specialize in.
• Kids are not learning about personal finance at home. A 2022 T. Rowe Price Survey noted that 57% of parents have some reluctance about discussing financial matters with their kids and 37% do not like to talk to their children about money. This is not surprising; 65% of parents wished they were more financially savvy, and 54%indicated that they were not financially prepared for the pandemic. Three out of four children indicated that they would go to their parents for money advice. But they indicated that they would look to their teachers, siblings, friends, YouTube, Facebook, Instagram, TikTok, and X (formerly Twitter) for financial advice as well.
• On a 2018 international financial literacy test of 15- year-olds, the U.S. ranked sixth out of 13 OECD countries, trailing Estonia, Finland, Canada, Poland, and Australia, and it was just slightly, but not statistically, better than Portugal, Latvia, and Lithuania. That’s four formerly communist nations that are doing as well or better than the USA—what a “Sputnik moment.”
• Most college students borrow to finance their education, yet they often do so without fully understanding how much debt is appropriate for their education or the connection between their area of study and the income level that they can expect to earn upon graduation. Many students attend college without understanding financial aid, loans, debt, credit, inflation, budgeting, and credit scores.
• At many colleges, financial literacy education is largely composed of brief, federally mandated entrance and exit loan counseling for students. Student feedback indicates that most do not comprehend the information presented and view it as one more requirement of the financial aid process rather than a learning opportunity.
• The 2021 adult survey in the most recent FINRA Investor Education Foundation’s Financial Capability Study indicated that just one in five American adults were offered and took financial literacy instruction in school, college, or the workplace. Most adults never get this education since it is not required instruction.
• Student debt can be very high for some recent college graduates and large debt variations exist from state to state. According to a recent Project on Student Debt study for 2020 four-year public and private college graduates, these students left college with average student debt that ranged from a low of $18,350 in Utah to a high of $39,950 in New Hampshire. The percentage of these students graduating with debt ranged from a low of 39% in Utah to a high of 73% in South Dakota.
• Employee pension plans have been disappearing for most private sector workers for decades and have been replaced by defined contribution retirement programs, which impose greater responsibilities on young adults to save and invest and ultimately spend retirement savings wisely. If they fail to do this, they could become a significant economic burden on our society. Most adults will not have pension plans. The US Bureau of Labor Statistics indicated that in 2022 only 11% of private sector workers participated in pension plans compared to 75% of state and local governmental workers.
• Financial literacy tends to improve as we age. This makes sense. Many are learning from their financial mistakes as they get older. The 2022 GFLEC P-Fin Index Study indicated that the average percentage of P-Fin Index questions answered correctly by each generation was as follows: Gen Z 42%, Gen Y 46%, Gen X 51%. Baby Boomers 54% and the Silent Generation 54%. Despite this increase in knowledge as adults age, each generation would earn an F on this personal finance knowledge quiz.
• A 2019 LendingTree survey indicated that nearly four out of 10 adults have no idea how their credit scores were calculated. Credit scores are a difficult concept for many young adults to understand. A 2023 Credit.com survey indicated that 42% of Gen Z respondents didn’t know what their credit score was. The economic cost of a low (or no) credit score is very high. One’s credit score and borrowing history impact one’s daily life when applying for a credit card, purchasing a home or car, renting an apartment, buying insurance, signing up for certain utilities, and even getting a new job. Having an excellent credit score could save a consumer in excess of $100,000 in interest payments over a lifetime (see: Credit.com’s Lifetime Cost of Credit Calculator).

Financial literacy leads to better personal finance behaviors. There are a variety of studies that indicate that individuals with higher levels of financial literacy make better personal finance decisions.

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 during their lives. Such programs are not just good for the individual but also helpful to society. The 2008 financial crisis and the 2020 pandemic clearly show that poor financial decisions by individuals can have negative consequences on our country.

The good news is that studies indicate that financial literacy educational interventions in high school have a positive impact, increasing student knowledge and resulting in an increase in positive financial behaviors.

Studies also indicate that giving educators the training they need to successfully teach personal finance topics in their classrooms works:

• Educators Who Learn to Teach Personal Finance in a Graduate-Level Course Are Dramatically More Confident and Effective. Students who learned personal finance from these trained teachers showed significant knowledge gains in all test topics, while a control group of students who did not receive personal finance education dropped slightly in knowledge in all but one area. Also, students who received formal education by trained teachers reported some improvement in most personal finance behaviors measured. Indeed, students who received personal finance education from trained teachers had “high financial literacy” on par with the literacy levels of Generation X (ages 35 to 49) and higher than that of older Millennials (ages 18 to 34) (see our Center’s 2015 Prepped for Success study.) In addition, the trained educators also reported improvement in their own personal finance behaviors after taking the graduate course.
• High School Educators Who Already Teach Personal Finance Substantially Improve Student Results After Receiving Substantive Personal Finance Training. An April 2021 Game Changer study shows the importance of training educators on financial literacy topics. This study looked at educators who were already teaching personal finance and whether substantive educator training improved student outcomes. It did—after receiving the training, those same teachers increased their student knowledge impact threefold from the academic year prior to the training. The training greatly increased the positive effect on student knowledge gained from the course when results from before and after the training were compared. These effects were even more pronounced for Black students—in fact, the improvement in knowledge for this group of students was significantly higher than their white counterparts. The knowledge improvement was significantly greater for students from households with parents having just a high school degree than for those students with college-educated parents. Unbanked students improved their scores more than their banked peers. The training helped educators with less teaching experience come closer to the student outcomes obtained by their much more experienced peers. This suggests that substantive education of this nature is particularly important to educators who are new to teaching the topic of financial literacy in the classroom. This study also suggests that all educators teaching personal finance should be required to take substantive training of this nature as a prerequisite to teaching a stand-alone course in financial literacy.

After students leave high school, not a day will go by when these young adults will not have to think about money—how to earn it, spend it, and save it. 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, start a business, and have rainy-day and retirement funds.

We would not allow a young person to get in the driver’s seat of a car without requiring driver’s education, and yet, in too many states, we allow our youth to enter the complex financial world without any related substantive 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.

For a detailed discussion on why teaching financial literacy in high school is effective, please see the article on page 22 of the full downloadable PDF report entitled “Why Is Requiring Financial Education in High School a Good Investment?” authored by Dr, Carly Urban.