How many high school students have sat in a required math class and asked themselves: Can I use (fill in the blank) in my daily life?
In 2020, Forbes posed similar questions about algebra, trigonometry, and calculus to 900 Freakonomics podcast listeners. Less than 12 percent reported using lessons from any particular high school math class in their daily lives.
Now insert “personal finance skills” into the sentence.
Anyone thinking about buying a car or home, taking out a student loan, getting a credit card, debating whether to eat out or make a meal at home, or making any other personal decision that one’s finances may respond positively.
But statistics show that many Americans lack the financial literacy to make informed decisions related to personal finances. More than a third of American adults report having more credit card debt than emergency savings; 68 percent doubt they will be able to pay a month’s living expenses if they lose their main source of income; and 25 percent report not having a reliable source of financial guidance, according to Annuity.org and Bankrate’s 2023 annual emergency savings report. Despite the data pointing to the lack of financial literacy, there is reason to believe that future generations of American adults will have a stronger understanding of the subject.
That’s because of a recent flurry of state legislation aimed at increasing financial literacy among high school students. Pennsylvania this past December became the 25th state to pass a bill requiring a personal finance course for high school students. The number of US states that have committed to improving teen financial literacy will more than triple by 2021.
“We went from eight to 25 states in the last two and a half years,” said Tim Ranzetta, a co-founder of Next Gen Personal Finance, a nonprofit that provides free resources to educators and advocates for financial literacy. education.
John Pelletier, director of the Center for Financial Literacy at Champlain College and the author of an annual report on the subject, putting recent growth into perspective. “In five short years, more than 4 in 10 US high school students will be enrolled in schools where a stand-alone, full-semester course in personal finance is required before will graduate,” he said. “That’s a 229 percent increase from 2017.”
Pelletier is one of many financial experts who say the pandemic is a major impetus for the states’ sudden interest in financial literacy curriculum. “It’s a wake-up call,” he said, noting how the pandemic has exposed widespread financial fragility in the country, from individual households to businesses.
Advocates for including financial literacy in K-12 education say the new requirements won’t come soon enough.
Financial literacy: Why it matters
High school students may not have the same level of financial responsibility as adults. But some are in a position to start showing some serious purchasing power: 18 is the legal age to apply for a credit card; Teen students can also apply for student loans for college. A personal finance course covering income, spending, saving, investing, and credit management—topics approved by the National Standards for Personal Financial Education—tend to make better borrowing decisions, according to government reports. In addition, financial education has been shown to help young people better manage cash flow and pay bills on time, according to the Center for Financial Security..
Why teach personal finance in schools?
Schools are the most likely and logical place for teenagers to learn about personal finance, experts say. And, since most personal finance courses are offered as a single semester, they tend to replace electives of similar length.
“If we don’t teach them in school, they learn on social media,” Ranzetta said. Some, but not all, of these financial influencers, called finfluencers, provide good financial information, he said. Others may benefit from the advice they share.
Some ask why students don’t trust parents to teach them about finances. But not all adults have a strong sense of financial literacy. And in many households, personal finance remains a taboo subject, with parents not comfortable sharing information about their own finances and the decisions that influence them, explains Kerri Harrild, a teacher who has taught personal finance at De Pere High School in Wisconsin for nearly two decades. He calls it his proudest teaching accomplishment.
“Students don’t know what they don’t know,” he said. “If they know better, they can do better.”
That applies to all students, Harrild said, from those who regularly participate in class to those who don’t see the value of education.
“Their brain may not work like our K-12 system,” he said. “And when they hear about this financial thing, they’re like: Finally, something I can use.”