Financial Literacy in High School?
In Oklahoma, all high school students are required to pass a class on personal finance before they can graduate. Banking, taxes, investing, loans, insurance and identity theft, among other subjects, will be part of the curriculum, and the teachers will have to certify that their students comprehend them all.
American high schools teaching personal finance further than simple budgeting, balancing a checkbook, compound interest and the like is not as simple as it seems. Teacher qualifications, funding, and curriculum management must all be considered. Overzealous mandates don’t recognize that often, teachers and students aren’t in a position to handle more than a cursory examination of financial topics.
School districts need to certify teachers in a specific financial discipline much as they would for a math or history teacher. On the whole, teachers feel unqualified to teach financial literacy. Schools and districts should not place any teacher in a position to teach subject matter he or she feels unqualified to teach.
Mississippi has started a program to train teachers through the state Council on Economic Education. Teachers complete 50 hours of free training and receive a Master Teacher of Economics distinction, qualifying them to teach personal finance. Teachers can attend multiple workshops put on by the state council and by the Federal Reserve.
Financial professionals should guide teachers as they learn financial literacy curriculum. They would get access to a new future potential client base and desperate school districts get knowledgeable instructors. This could lead to financial institutions lobbying for influence on the curriculum to the dismay of many.
Does It Work?
Children appear to be hungry for knowledge on the subject. A 2011 Charles Schwab survey of 1,132 American teens aged 16 to 18 showed 42% of the respondents would like their parents to talk more to them about how to establish good credit.
That same study shows a decline in knowledge. In 2007, 43% of 18-year-olds claimed they knew how credit card interest and fees work. In 2011, that fell to 32%. Those numbers are significant when you think that freshmen bring an average of $1,585 in credit card debt to college.
It seems most financial literacy education doesn’t work. Scores on the Jumpstart High School Survey fell 9 percentage points between 1997 and 2008, the most recent year the study was undertaken. The average score of 48.3% is well below the 60% considered to be a passing score. Even more discouraging is that students who took a personal finance class in high school scored no differently than those who didn’t.
Of the respondents to the 2008 survey, about one-third used a credit card belonging to either themselves or their parents. The students who did not use a credit card scored five points better, on average, than those who used a credit card. In fact, they scored better than card users on questions directly related to credit. Students who used an ATM/debit card for their purchases had scores that were 5.7% higher than credit card holders.
According to H&R Block, 75 percent of teenagers say their parents are their most important source of financial information. In fact, 62 percent of survey respondents thought of their parents as good role model for money management, and only 4 percent saw their parents as poor examples of how to handle money.
I believe the more serious problem in our country is the lack of basic math and literacy among parents. A CreditCards.com study found that cardholder agreements are written at a 12th grade level, making them incomprehensible to four out of five adults. The average American adult reads at a ninth grade level, and almost half cannot read beyond the eighth-grade level.
We also need more emphasis on basic math. People who can add, subtract, divide and multiply do a lot better financially than those who can’t. For this reason, I do favor embedding personal finance modules into math, science, home economics and other subjects throughout the school year instead of having a dedicated financial literacy or personal finance class.
Finally, it starts at home. Parents, even with little financial knowledge, must address the emotional component of financial decision-making. A 2011 study published in the Proceedings of the National Academy of Sciences found that children with poor self control as early as age 3 struggle financially when they grow up. As adults, they reported more money management difficulties and had accumulated more credit problems.
Experience Is The Best Teacher
A high school student taking a mandatory semester-long course in personal finance from someone of questionable qualifications will not come out financially literate. Without real-world application, knowledge is stale and not committed to long-term memory.