Money makes the world go round. It permeates every aspect of our lives, from our careers to our clothes to our interactions with families and friends.
Yet, we aren’t teaching students even the basics of money management. According to a 2012 study conducted by the Organization for Economic Co-operation and Development, more than 1 in 6 students from the United States could not achieve the lowest level of proficiency in financial literacy. In this respect, the U.S. is at the level of about Latvia or Russia. Even worse, the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation in 2015 found that about two-thirds of Americans could not pass a basic financial literacy test.
To make this situation more appalling, the public-school system fails to incorporate a sound financial education. For every $25 spent on financial marketing, a meager $1 is allocated to financial education. More than half of all states do not include a compulsory economics class for high schools. Only five states require a separate, semester-long personal finance course for high school graduation: Alabama, Missouri, Tennessee, Utah, and Virginia. A mere third of states mandate any sort of personal finance curriculum, typically included as a component of an economics, mathematics, or social studies class. It fares even worse for primary education. Financial literacy is almost entirely absent at the elementary and middle school levels.
A well-developed financial mindset is becoming more and more necessary in today’s society. Increasingly, complex financial products are becoming more readily available to the public, and constant changes are occurring in the financial scene. Without a thorough grasp of concepts such as liquidity, risk, interest compounding, and investment cost, consumers cannot determine the most effective financial products. Furthermore, financial ignorance comes at a steep price. Those absent of strong financial skills face more transaction fees, higher interest rates on loans, larger debts, and less in savings. Early financial missteps can fuel years of financial struggles. In more severe cases, this can lead to loan defaults, insolvency, and bankruptcy.
On the other hand, financial knowledge leads to long-run economic security and confidence, generating a tremendous return on the initial investment into financial education. There exists a strong positive correlation between financial literacy and wealth.
So, how do we improve this situation?
As with other skills, mastering the fundamentals of financial literacy requires tremendous practice and investment. Preferably, it should take place in a stand-alone class.
This begins with implementing some much-needed instructor training on the subject. According to the National Endowment for Financial Education in 2009, an estimated 20% of the surveyed K-12 teachers reported that they were not sufficiently prepared to educate students about personal finance.
A number of organizations provide physical or online coursework and training for teachers and students. One valuable digital resource is EconEdLink, which offers Internet-based, classroom-tested materials on personal finance for K-12 students and teachers. Schools can also incorporate financial literacy by offering unique opportunities to students outside of the classroom, such as personal budgeting seminars, mock stock trading programs, and job shadowings of financial professionals.
To bring these changes into fruition, parents and students should voice their frustrations at school board meetings and to local government officials. Then, children – and American society as a whole – can reap the tremendous ROI (return on investment) from a financial education: less financial stress and more financial security. In this way, it turns out that money can buy happiness!
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I completely agree that the U.S. is lacking in financial education. I only took one economics class in high school, and I barely learned anything. Even though I agree that students should spend more time learning about financial topics in school, I also think that parents should take more responsibility for educating their children on financial literacy. Maybe some type of community class that educates parents and students together would be a good intervention plan. Unfortunately, with the increased complexity of the financial climate, it is getting easier and easier for people to take advantage of customers. More knowledge will help them stop getting taken advantage of. Good job on this post!
There definitely needs to be more financial education in public schools. I think this really starts with at the state-level requiring schools to learn about financial education. However, while I think this would be important for schools to have, I don’t know if more schools will ever start to really really integrate it into the classroom. With all the budget cuts on education, I think it will be hard for schools who do not receive a lot of funding as it it already, to bring this type of education to their school. I do think financial literacy is very important and hopefully some day, more states will start to make it a requirement for it to be taught.