For hundreds of years in the United States, students have been learning about reading, writing and arithmetic. But there is one area of learning that has been sorely lacking, and that is the area of personal finance. If students do not have a firm grasp about how to manage their money, they will be set up for a lifetime of difficulties in that area. Administrators are understanding this phenomenon, and this year alone, twenty-five states have introduced legislation to add personal finance to the high school curriculum.
Moving Toward Financial Literacy
In late October, both Michigan and Ohio passed legislation requiring a credit in personal finance for high school graduation. Ohio signed the measure into law on October 28, becoming the 10th and largest state to require personal finance as a standalone class. Students in over six hundred school districts will benefit from this move. Currently, twenty-one states have a personal finance requirement, though it can be part of another course and does not have to stand alone.
“I was a banker for 41 years and I saw the results of us not teaching our children financial literacy,” said Ohio state Senator Steve Wilson, chair of the Ohio Senate’s Financial Institutions and Technology Committee and a primary sponsor of the bill. “I wanted to do something about it.” With the new bill in place, thousands of Ohio’s students will learn how to manage their money, which will set them up for success long into the future.
Michigan has the same interest in solving financial problems before they even start. Republican State Representative Diana Farrington of Utica, Michigan said. “Personal finance is one of life’s most important responsibilities as graduates move into adulthood, but our curriculum has neglected to prepare our young people to manage their resources wisely.” With the new move to a financial curriculum, students will learn about bank accounts, savings, the stock market, and how to regulate their own financial wellness.
“Without that kind of education, we’re thrusting kids into a world to learn to manage money through the school of hard knocks,” said Brian Page, senior director of partnerships and advocacy at Next Gen Personal Finance who was previously a teacher at Reading High School in Reading, Ohio. And inevitably, the school of hard knocks will knock hardest on those who are already at a disadvantage. Legislators are realizing that it is a much better idea to learn to manage money on the front end, before someone gets themselves in economic trouble because of lack of knowledge.
In a study by Brown, Collins, Schmeiser, and Urban, researchers discovered that in states where personal financial high school mandates were enacted, the credit scores of those in the class were better than students in neighboring states who did not have the class. In addition, taking the class reduced the default rate of young adults who participated in the class. These types of studies indicate the positives that will spring from a program like the personal finance class.
Bridging the Gap
Currently, depending on their personal family history with money, students may already be well-versed in fiscal responsibility, or may not even understand what a bank account is at all. This disparity in economic education is one reason lawmakers are trying to include fiscal education in high school. Current Education Secretary Miguel Cardona is a champion of financial education, especially for those who already have some disadvantages.
Minority groups often struggle with job earnings, long-term savings, and other fiscal elements, and one of the big reasons is because they just don’t inherently know about these money matters. Twelve percent of Hispanic households don’t have a bank account —and it can cost them dearly in the future. If students could learn these lessons in high school, they would have a better chance of being financially successful in the real world.
And with the pandemic already causing an educational upheaval, this is the perfect opportunity to change school curriculums and help all students gain financial literacy. “We can’t wait for a personal finance course in high school,” Cardona said. “We need to infuse it more naturally so that by the time they get to high school there’s a better understanding of it.”
“I can’t think of a better time than now where we are as close to the reset button in education as we’ve ever been,” Cardona said, adding that students of color have historically experienced a learning gap and were also disproportionately affected by the pandemic. “I expect that as we reopen schools, we are aggressively addressing whatever instructional loss and time our students have had.”
All students must be accounted for when discussing personal financial education, because if students can see themselves in the equation, they will be more apt to succeed in finding the financial answers that will resonate long into the future. “Schools who serve students whose families are monolingual Spanish speakers must make resources available to those families in a language that we understand,” Cardona said. “We all benefit from that.”
How Change Will Occur
Both state and national leaders are trying to make this transition as easy as possible. Provisions in the American Rescue Plan and the Build Back Better plan by President Joe Biden are both slated to bolster classes and programming for students and teachers nationwide. All levels of government will need to work together to level the playing field for ALL students and to teach financial literacy in school. And as with anything else the nation wants its children to learn, the earlier students begin financial literacy training, the better.
On a practical level, this will be a big change for high schools and there are some provisions already being put in place to achieve a smooth transition. For instance, the Ohio legislation allows schools to receive a special certification if necessary, so that those not already licensed to teach personal finance may do so. A special financial literacy fund created from local financial institutions will finance these certifications through the financial literacy fund. This is good news for schools that are already strapped for cash.
It stands to reason that when people know better; they do better. With the backing of the Education Secretary and help from state governments in passing legislation aimed at fiscal education, high school students will be given the tools they need to build economic success for themselves and their families long into the future.