Most states take a scattershot approach to teaching personal finance concepts to high school students, a newly released financial literacy report card finds, with just a handful of exceptions.
The 2017 Financial Report Card from Champlain College’s Center for Financial Literacy gave just five states — Alabama, Missouri, Tennessee, Utah and Virginia — an A grade for their efforts. The five require high school students to take at least a half-year personal finance course, or the equivalent, as a graduation requirement. The courses cover topics like using credit safely, saving for retirement, investing and navigating the financial decisions that typically occur in a person’s lifetime.
While there has been debate over whether mandating personal finance education is an effective way to make young people more savvy about money, the report cites studies suggesting that instruction is helpful if teachers receive “robust” training and use a well-designed curriculum. John Pelletier, the report’s author and director of the center, in Burlington, Vt., argues that personal finance is a “critical subject” for high school students preparing to enter college or the work force.
The report card gave Bs to 19 states that require students to receive personal finance instruction to graduate from high school, but may devote less time to it than A states. For instance, some B states — including New Jersey — let districts decide whether to cover the topic in a stand-alone course or include it within another course, which may dilute the intensity of the instruction. The 12 states that earned Cs and the four with Ds included some personal finance topics in state standards, but left the decision on how much to teach up to local districts. The report flunked the remaining 10 states and Washington, D.C., saying they have “few requirements or none at all” for personal financial education in high school.
“What the grading shows is that we have a long way to go before we are a financially literate nation,” the report found. Mr. Pelletier cautioned that even within states with poor grades, individual schools or districts may offer strong personal finance instruction.
Utah was the only state to get an A-plus. The state requires students to take a state-administered test at the end of the course, and recently mandated that the class cover the cost of college and student loans.
“The timing couldn’t be better,” said Travis Cook, a financial literacy specialist with the Utah State Board of Education, noting that student debt nationally is mushrooming.
The report card, an update of an assessment done in 2015, is based on the premise that all high school students should, at a minimum, be required to take a course that includes personal finance topics, even if the topics are just a “modest” part of the overall course.
Interest in financial literacy has risen since the 2008 financial crisis, but there is some disagreement on how best to teach it. A study published in 2015 suggested that additional math instruction for students might be more helpful than traditional personal finance instruction.
The authors of a separate study, done in 2015 and funded by the Finra Investor Education Foundation, noted that past research had found, “at best, mixed evidence” that financial education improved financial well-being. Still, after comparing three states that adopted mandatory personal finance instruction with neighboring states that did not, the study found reason for optimism.
“We find that if a rigorous financial education program is carefully implemented,” the report concluded, “it can improve the credit scores and lower the probability of delinquency for young adults.”
Lauren Willis, a professor at Loyola Law School in Los Angeles who has argued for stronger consumer financial protections, said she saw more promise in “consumer self-defense classes,” which focus on “spotting and avoiding scams, spotting manipulative advertising, and the like.”
Professor Willis is advising the FoolProof Foundation, a Florida nonprofit group that creates free courses that teach high school students (and now middle school students) the importance of a “healthy skepticism” when evaluating various forms of debt. FoolProof’s online lessons emphasize, for instance, that credit cards are a “wildly expensive” way to borrow and can build “lifetime debt.”
Mr. Pelletier said there were other options for schools that wanted free or low-cost financial literacy classes that weren’t sponsored by banks. He cited, as two examples, Next Gen Personal Finance, a nonprofit group based in Palo Alto, Calif., that offers free online classes and teacher training, as well as offerings from the National Endowment for Financial Education.
Here are some questions and answers about financial literacy education:
What if my child’s school doesn’t offer personal finance instruction?
Laura Levine, chief executive of the JumpStart Coalition for Personal Financial Literacy, an advocate for financial education for young people, encourages parents to talk to their child’s teachers and principals and to school board members about offering the subject. “We as parents have voices,” she said.
The coalition’s website includes a clearinghouse of instructional material for teachers, often free. Some programs are sponsored by financial institutions, Ms. Levine said, but the coalition requires that the material be presented in a “balanced” way.
Also, the Consumer Financial Protection Bureau recently developed a guide for advancing financial education.
What should a high school financial literacy class cover?
Both the JumpStart Coalition and the Council for Economic Education recommend standards for kindergarten through grade 12, with detailed benchmarks for each grade.
For instance, the council recommends that schools cover earning income, buying goods and services, saving, using credit, investing and looking at insurance. In high school, the “saving” topic should include how much a student would need to save to buy a car, and explore how inflation affects the purchasing power of savings.
Shouldn’t children learn about money at home?
Ideally, Mr. Pelletier said, children would begin learning about financial concepts from their parents, but that’s not necessarily happening. A T. Rowe Price survey last year found that more than two-thirds of parents were reluctant to discuss money topics with their children.
Parents may be hesitant because they have made poor decisions themselves in the past, Ms. Levine said. Still, she said, parents should try to talk about spending and budgeting — starting, perhaps, by explaining why the family made a certain budget decision. Or, she suggested, parents could research, together with their children, information about setting savings goals. The coalition offers tips and online tools on its website.
“We encourage parents to talk to their kids about money,” Ms. Levine said.