Last week, Florida became the latest state to require a course in financial literacy as a prerequisite for graduating from a public high school.
It’s part of a trend that has more than 50 personal finance education bills under consideration in 26 states, according to Next Gen Personal Finance, a nonprofit that tracks the legislation.
There is conflicting information about the extent of financial literacy efforts in schools – much of it lies in the difference between the courses required to graduate and the courses that school districts are required to offer so that students have the opportunity to take them – but it’s safe to say that seven states already require personal finance courses in high school, and another 20 states have some kind of personal finance education in their curriculum.
All of these efforts are important steps forward in equipping young people with vital skills and information.
In general, they should be rented. They are the result of good intentions and they provide solid and useful information. They are not controversial; at a time when Americans can debate what constitutes history and what should be taught in school, no one disputes the idea that children need to know about concepts such as inflation, capitalization, budgeting, taxes, investing, etc. In general, financial literacy bills have broad bipartisan support.
Unfortunately, the impact of these courses is very limited. There is little evidence that receiving financial literacy information in high school affects how these students manage their finances as adults.
Unfortunately, America’s financial literacy problem will not be solved by legislation.
High school is both too late and too early for that.
Yes, it seems impossible to be both early and late at the same time, but that’s how it is.
It’s too late because children become consumers almost as soon as they can talk; long before they pay anything, they influence household purchasing habits. Moreover, even in families with good money habits, children often engage in bad behaviors because they don’t yet understand how money works.
They see mom withdrawing money from a machine, never seeing the money go to a bank account; they see credit cards being used for everything, not knowing that the bills are coming in at the end of the month. They see the parents working, but do not understand that the work is responsible for the money that feeds the house.
And that’s not even taking into account the “buy, buy, buy” message that underpins social media.
By the time they get to high school, kids not only have a lot of misconceptions about money, but they also have certain locked-in behaviors. Consider the “children of depression”, who have learned frugality or who throw away to keep every possession – even after it has lost its value – because they “grew up with nothing”.
Pushing financial literacy in high school is admirable, but we should make sure that elementary schools do math problems involving dollars or talk about capitalization. We should help children understand that money gives us choices, allowing them to learn the basics of budgeting by doing math exercises on what they would buy and how they can make money theory covers their needs.
Make sure that elementary education uses real concepts, and money lessons will find their way into almost any subject.
Not a big course, not much, just examples that make money a constant and remove the taboos of talking about it.
But in calling for this super-early money education, it’s important to recognize that high school grades are also “too early,” which is why no amount of schooling solves the problem for everyone.
Like many facets of education, what you learn must be applied to have a lasting impact. Secondary students – despite developments that make it easier for them to save and earn – generally do not have personal financial worries. They won’t internalize the lessons until they do.
They can meet the course requirements and pass the course without changing their financial habits.
Economist Lewis Mandell and finance professor Linda Schmid Klein conducted a study a decade ago that looked at about 80 college students who had taken a personal finance course in high school. One to four years after completing this course, students were no more financially savvy than students in the same schools who had not taken the course; moreover, students who took the course did not show better financial behaviors and did not even think they were more savings-oriented than their peers.
Says Mandell: “Financial education doesn’t work when it’s given before the consumer needs it.
That’s not to say students won’t ring a bell years later when they choose to enroll in a workplace retirement plan or buy a credit card, but it’s an alarming signal that legislation making kids smarter about money is a feel-good factor rather than a blessing.
It’s no different than what we experience as parents. We warn our children about the dangers of debt and the problems of buying now/paying later, but that doesn’t stop the next generation from trying it at least when they become consumers and onwards. until they reach uncomfortable levels of debt. .
They might stop in time, but countless studies of Americans’ financial habits indicate that too many people go all the way before finding the motivation to do it right.
Education will help solve this problem, but only to a small extent. Instead, it’s a problem we all need to try to solve in our homes and family/friend circles.
Talk about money, pay the bills in front of your kids, talk to them about preparing your tax returns and more.
No matter what politicians may legislate schools to teach, there’s no place like home when it comes to teaching good and bad money lessons.
Don’t count on educators to give your children some money; if they don’t learn good financial skills from you, they will almost certainly pick up bad financial habits elsewhere.