By Zoe Han
Over 99% of Tennessee high school students must take a personal finance course to graduate
Financial literacy is key to managing money, but how well are states preparing their students?
Tennessee tops the list of US states that offer the best financial education to its residents, according to a new report from financial services firm OneMain Financial. More than 99% of public high school students in Tennessee have what is called a “gold access” education, attending a school where they must take a personal finance course to graduate.
The OneMain Financial report examines four things for each state: the number of active bills promoting some form of financial education in public schools, the status of economic education in public high schools, the level of education in personal finance offered and required; and the proportion of high school students in schools accessing gold.
New York, Utah, Alabama and Virginia followed Tennessee in the rankings. Although only 2% of New York City high school students are in gold access schools, 11 financial and economic education bills have been proposed in the state this year. In the other three states, more than 97% of students are in gold access schools. (Tennessee, however, has a higher poverty rate than at least 30 other states)
“We believe that understanding budgeting, savings, loans, and credit cards and credit scores can prepare people for a life of financial well-being,” OneMain Financial said in the report. “So we took a closer look at the latest legislation and conversations to assess how we as a nation are giving people access to financial knowledge.”
In total, elected officials had introduced 69 bills focused on financial education in 27 states this year by the end of October, according to the Next Gen Personal Finance Financial Education Bill Tracker. NGPF is a non-profit organization that aims to bring personal financial education to all students. Of these bills, 12 had been signed into law in 10 states and 8 were still pending in 3 states.
About two dozen states require students to learn about personal finance, either in a dedicated course or integrated into other subjects, in order to graduate from high school, according to the Survey of the States report from the Council for Economic Education. A few states, including Florida, passed bills in the summer of 2022 making personal finance courses an individual requirement.
According to the Council for Economic Education report, Alaska, Wyoming and the District of Columbia have no personal finance education requirements in K-12 schools and have not seen any new bills. California has no such requirements in place either, but the state passed a bill in July to create a statewide task force to look into the matter.
(OneMain Financial declined to offer a rating of the states with the poorest performance in personal finance education. However, the researchers said that 68% of US high school students did not understand credit scores and also noted that auto loans rank behind mortgages and student debt accounts for the largest share of adult household debt.)
Americans consistently score poorly in financial literacy survey
American adults have answered only 50% of questions about personal finance correctly in an annual financial literacy survey for the past six years, according to the 2022 report by the nonprofit TIAA Institute and Global Financial Literacy Excellence Center at George Washington University.
Financial literacy tends to be lowest among young Americans, according to the TIAA Institute and GFLEC’s Personal Finance Index, a list of 28 core questions in the annual survey. On average, some 54% of Baby Boomers answer all questions correctly, while 42% of Gen Z respondents answer all questions correctly. The questions cover everything from saving, investing and borrowing to earning, consuming and understanding risk.
Financial literacy levels have been “stubbornly resistant to progress,” according to analysts at the Milken Institute, a nonprofit think tank based in Santa Monica, Calif. “This result is particularly worrying for young people, who are likely to face greater financial challenges. than previous generations,” the researchers concluded in a 2021 report.
Money management skills needed
Over the past two years, the pandemic has caused many states to consider requiring financial literacy training in schools. The pandemic has disrupted the jobs and incomes of many households and especially low-income families. The push to promote financial education in schools appears to have paid off in Tennessee: the state’s average credit score rose 4 points to a “good” FICO (FICO) score of 701 the year last.
Americans continue to face an uncertain economic outlook. Although inflation fell to 8.2% in September, according to the latest government data, it was still at 7.7% in October compared to a year ago. The rise in the cost of living finally showed signs of slowing down after inflation hit a 40-year high of nearly 9% this summer more than a year ago. However, high inflation has already taken its toll on millions of cash-strapped households.
Federal Reserve Vice Chairman Lael Brainard indicated earlier this month that the Fed may slow its pace of raising interest rates. It has raised rates six times this year and raised its policy rate by 0.75 percentage point in November for the fourth time. That pushed the short-term borrowing rate into a target range of 3.75% to 4%, making car loans and credit card debt more expensive.
Consumers also said they had to dip into their emergency savings to cover their monthly bills. At the same time, American households have become more dependent on credit cards and personal loans. Total bank credit card balances hit a record $866 billion in the third quarter of 2022, up 19% from a year ago, according to TransUnion (TRU).
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