BETHESDA, Maryland — As Secretary of Education Betsy Devos sets out to reform America’s underperforming public schools, here’s hoping she puts their appalling lack of personal finance instruction near the top of her list.
It’s difficult to believe, but our nation’s high schools are flunking badly when it comes to imbuing their students with the key elements of financial literacy. But facts are facts!
A recent study by the Council for Economic Education (CEE) found that only 17 states require high school seniors to take courses in personal finance — unchanged from two years before.
Personal finance courses don’t require teachers with a costly degree from the Harvard Business School
That’s especially distressing when you consider that a young person’s senior year is high school is the last great opportunity to acquire financial literacy before entering today’s costly, complex and rapidly changing world.
Personal finance courses don’t require teachers with a costly degree from the Harvard Business School or Northwestern’s Kellogg School of Business. Almost any teacher who can balance a checkbook can follow some already successful course guidelines to impart financial basics to graduating seniors.
"To be successful, most kids don't need to learn about collateralized debt instruments, but they do need to know how to open a bank account, how much they need to save each month to reach their goals and, if they borrow this or that amount of money, how much money they will need to earn to pay it back" says Nan J. Morrison, president and CEO of New York’s Council for Economic Education.
She and other newly-emerging advocates of personal finance are responsible for many of the recent gains that have been made in the establishment of what some term “everyday economics” in high school classrooms.
In 1998, only 14 states required high schools give their seniors a rudimentary knowledge of personal finance. Now 37 states require that those standards be implemented in their public high schools.
Personal finance courses also can provide an import legup to students in low-income areas
Over the last few years, populous states like New York and Illinois have toughened standards to include the teaching of personal finance. In addition, the state of Washington has new legislation that requires financial standards to be taught.
While more states are implementing standards in personal finance, the number of states that require high school students to take a course in personal finance remains unchanged since 2014 – just 17 states.
What’s more, states with the most rigorous personal finance requirements send their students on to college or into the real world with a measureable head start.
Data released recently by the Investor Education Foundation show high schoolers who passed mandatory personal finance courses have better than average credit scores and lower debt delinquency rates as young adults.
The IEF study found "notable improvements" in credit outcomes for 18 to 22-year-olds in three states — Idaho, Georgia and Texas — where financial education mandates are considered rigorous by the Council for Economic Education.
Personal finance courses also can provide an import legup to students in low-income areas with lagging schools.
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Hemmed in by poverty
One of the key reasons for the perpetuation of poverty is that young people in such areas often are unemployed or underemployed and frequently find themselves at the mercy of loan sharks.
Hemmed in by poverty, newly graduated seniors more often find themselves struggling to pay bills and manage what little money they have.
The sad result is that they end up with their lives controlled by merciless loan sharks who trick them into such self-perpetuating schemes as payday loans with stratospheric interest rates.
Their frustration often is increased by the fact that newly arrived immigrants have the financial knowledge to start up businesses almost from the moment they arrive in this country.
A recent study by Paris-based Organization for Economic Cooperation and Development found that more than 1 in 6 American students failed to reach the baseline of financial literacy.
Overall American high school graduates landed in the middle of the pack with ratings just behind Latvia and just ahead of Russia — neither among the world’s economic powerhouses.
As Nan Morrison is quick to note: “Exposure is everything! When you have good financial literacy, you tend to have good economic outcomes."
K. Alexander Ashe is the CEO and founder of Spendcast, a hi-tech firm that develops Apps with the ability to spur financial intelligence in their users. He holds a master’s in industrial engineering degree from Columbia University. Readers may e-mail him at .(JavaScript must be enabled to view this email address)
