Financial literacy needs to start early for students in the classroom
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(State of Financial Education: Many money problems that Americans face could have been avoided if financial literacy had been taught earlier in school. This knowledge helps create a foundation for students to develop quickly. strong financial habits; and avoiding many mistakes that lead to lifelong financial struggles. This story is one in a series examining the current landscape of financial education in this country.)
The lack of personal finance education in this country has proven to be devastating.
This has led many people to rack up credit card and student loan debt, live paycheck to paycheck, and not save enough for retirement. This has kept people from buying a house or in some cases getting enough food on the table.
As a country, we have seen millions of Americans, with a general lack of financial planning, struggle every day with their money, only to find themselves deeply in debt.
Various industry research has revealed that 2 in 3 families have no type of emergency savings; 78% of adults live paycheck to paycheck, and 3 in 5 adults don’t keep a monthly budget.
In addition, on average, American adults correctly answered only 50% of the questions on the TIAA Institute-GFLEC Personal Finance Index in 2021.
That’s why it’s so crucial to start teaching kids about personal finance in high school, say financial literacy advocates.
However, what many researchers have found is that far too few students – especially those from low-income backgrounds – receive personal finance training in high school. Yet they are expected to make big financial decisions regarding student loans and budgeting for living expenses after graduation.
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“If we want to make sure that everyone in this country has something to eat and a roof over their heads, we have to teach them how to manage their money,” said Nan Morrison, Chairman and CEO of the Council for Economic Education (CEE) and member of the CNBC Invest in You Financial Wellness Council.
However, only five states require high school students to take a separate finance class, according to the EEC. A sixth, Missouri, also requires a stand-alone class, according to an analysis of Next Generation Personal Finance, a nonprofit group that creates free classes and funds high school teacher training.
Fifteen states that require courses fit it into another class, and five more require that a personal finance course be offered, but not required for graduation.
However, more positive changes could come as 25 states and the District of Columbia introduced bills in their 2021 legislative sessions to improve access to financial education. According to Tim Ranzetta, CEO and co-founder of Next Gen Personal Finance, these bills range from forming task forces and committees, to setting standards for what needs to be taught in a course, to ensuring that every high school student takes a course before graduation.
Certainly, advocates of financial literacy stress that early education is essential.
“How can we expect people to complicate [money] decisions without education? “said Annamaria Lusardi, professor at the George Washington University School of Business and founder and academic director of GWSB’s Global Center of Excellence for Financial Literacy.
“My students are coming in and they don’t even know how credit cards work,” she added. “A lot of them didn’t know how student loans work.”
Even integrating the course into another class carries the risk of not being taught at all, Ranzetta said. Only about 36% of schools in states that have built-in subject mandates actually require the course, as of April 2020 research paper find.
However, that doesn’t have to be the case, advocates say. Many of the financial problems Americans face could have been alleviated if financial literacy had been taught earlier, in school, they say.
At this point, financial literacy advocates report a mountain of research they say proves financial education translates into better outcomes for the lives of students.
A study that compared three mandate states to three that do not require a course found that credit scores improved in mandate states. Three years after implementing education in Georgia, Idaho and Texas, all three states have seen a reduction in severe delinquency rates and seen their credit scores rise.
Another study found that education increased the likelihood that students attending university would apply for financial aid and reduced private loan balances for borrowers by about $ 1,300.
In Utah, the first state to mandate a separate financial literacy course for its class of 2008, there has been a small but steady increase in student performance. Still, Breckon Heywood, who oversees the state’s general financial education program, acknowledges its value extends far beyond the high school years of students.
“Educational experiences take enough time to take hold and change behaviors in all of us,” said Heywood, who previously worked with a bankruptcy law firm and saw first-hand the value of l financial education.
In states that do not have such a mandate, schools, nonprofits and community centers are mushrooming.
In Philadelphia, Niche Clinic runs a program for high school students that teaches them not only to save, budget, and invest, but also to earn up to $ 5,000 to create meaningful change in their school or community.
High school student Jeiber Colon-Marquez is taking a personal finance course as part of a non-profit program.
Source: Jeiber Colon
Students walk into the classroom not knowing much about money, such as the process of creating debt, how insurance works, and the whole world of investing, said Dan LaSalle, who created the program. in 2015 when he was an English teacher at Olney Charter School.
“Some had credit cards with thousands of dollars in debt,” said LaSalle, who now runs his nonprofit full-time.
For 17-year-old Jeiber Colon-Marquez, education has changed the game. Her parents told her about the importance of economy and no overspending, but that was about it.
“This program has completely changed my life,” said Colon-Marquez, an elder at Olney Charter School.
“I know how to invest,” Colon-Marquez said. “How to buy a house. How to negotiate a car contract. How to pay for college.”
While personal finance lessons may not be a priority for educators who are struggling to teach students virtually and safely reopening schools amid the pandemic is when students need it most, advocates say.
While the financial devastation and the hardships people experienced during the crisis could not all be avoided, they may have been alleviated a bit by more widespread financial education, EWC’s Morrison said.
“It is not the only tool in the toolkit for financial stability and economic mobility, but it is an essential tool if we are to help people move forward in their lives.”
Next Gen’s Ranzetta is hoping the pandemic can be a turning point.
“It is clear that the pandemic-induced recession has focused minds on the need to bring this essential course to more high school students,” said Ranzetta, who is also a member of CNBC Invest in You Financial Wellness Council.
The legislation does not necessarily mean that this is a done deal. For example, the New Mexico bill that requires students to take a financial literacy course to graduate from high school passed the state House of Representatives, but was never submitted to a final vote in the Senate.
One of the bill’s main sponsors, State Representative Antonio “Moe” Maestas, hopes it will be passed within the next two years as part of an overhaul of the state’s education curriculum.
“A lot of our educational institutions are kind of stuck in the 1950s,” he said. “We need to update what students are learning to be successful in a complex 21st century society.”
Colon-Marquez of the Olney Charter School certainly believes his education will help him succeed.
“It opened my eyes to so many things I never knew,” he said. “It brings me closer to becoming financially free.”
Disclosure: NBCUniversal and Comcast Ventures Invest in Tassels.