The number of states requiring high school students to know about personal finance matters continues to grow in 2021, with another state – Florida – about to join the ranks.
The addition of Nebraska and New Mexico in the past two years brings that number to 23, according to a report released Thursday by the Council on Economic Education, a nonprofit organization that promotes education in economics and personal finance.
In Florida, where the legislature has approved a bill requiring students to complete a full semester of personal finance courses before graduation, a spokesman said Gov. Ron DeSantis is “excited” that the bill has reached his desk. (Florida high schools already must offer an elective course.)
The pandemic has heightened financial concerns, and rising inflation has strained family budgets. These factors, coupled with ongoing concerns about heavy student debt levels and precarious retirement security, create a stronger case for making personal finance skills a priority for high school students who will soon have to decide on college loans or get a job, says financial advocate Literacy.
“The need has never been greater,” said Annamaria Lusardi, founder and academic director of the George Washington University Center for Excellence in Global Financial Literacy. “We should be adequately preparing younger generations for the future.”
Financial literacy – an effective grasp of concepts such as saving, credit, interest rates, investing and risk assessment – is generally low among U.S. adults, according to a recent report by the Center of Excellence and the American Teachers Insurance and Annuity Association, especially the Young Adult Institute. For example, two-thirds of Generation Z adults were unable to correctly answer more than half of the financial questions in the center’s survey, which compared financial literacy across five generations. (Members of Generation Z were born between 1997 and 2012; the oldest member is now 25 years old.)
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Tim Ranzetta, co-founder of Next Gen Personal Finance, said, “This pandemic shows that there is a critical need for the average American to have these skills.” Next Gen Personal Finance is a nonprofit organization that develops and funds personal finance instructional materials for schools.
Mr. Ranzetta said a state survey conducted for Next Gen found strong support for high school personal finance requirements and that dozens of proposals are awaiting action by state legislatures. He said it’s not certain how many will become law, but requirements in large states like Florida could help spur efforts in other states.
“There will be a FOMO effect,” he said, using the acronym “fear of missing out.
Financial literacy advocates say state requirements can help ensure that all students, regardless of income or race, learn basic money management skills. According to the TIAA Institute, financial literacy in Generation Z tends to be lowest among those who have not currently attended college or have never attended college.
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“When it’s enforced, everyone has access,” said Rebecca Maxcy, director of the financial education program at the University of Chicago.
Nan J. Morrison, president and chief executive officer of the Council on Economic Education, said that while the progress among the states is encouraging, more work needs to be done. Currently, only nine of the 23 states require personal finance as a stand-alone course. Others allow the subject to be combined with other courses, such as math or social studies, or provide other ways for students to opt out of courses, which could weaken its impact.
In conjunction with the release of the new report, the council also announced the formation of a coalition of businesses and nonprofits with Visa called FinEd50 to help promote “guaranteed access” personal finance courses in all states.
Here are some questions and answers about financial literacy education.
Don’t students learn about personal finance as part of the economics curriculum?
Sometimes. But the growth in state requirements for teaching economics has stalled. A report by the Council on Economic Education found that two years ago, 25 states required economics courses in high school, and that number has not changed. Two states have recently considered eliminating the requirement to study economics.
“We’re actually a little concerned about that,” Ms. Morrison said.
She said the committee will take a closer look at why efforts to expand economics education have stalled. Students need to understand economics and personal finance in order to “successfully navigate their lives” as individuals and members of an increasingly complex society, she said.
Is teaching financial literacy in high school effective?
There has been debate about what works, with some research suggesting that financial education has a limited impact on behavior, or that students may just learn more and learn better. But recent research suggests that high school personal finance courses can help young people make better financial decisions.
A study published in 2020, led by a Montana State University researcher, found that financial education requirements were associated with fewer defaults and higher credit scores among young people. A 2019 study from the University of Wisconsin-Madison found that mandatory “significantly lower” the likelihood of borrowing high-interest payday loans.
Teaching should be relevant to students, Ms. Morrison said. Talking about part-time jobs that emphasize mowing lawns, for example, may not resonate with high school students in urban settings, she said.
While some may be hesitant, Mr. Ranzetta said, lessons aimed at high school students should include discussions of new financial tools, such as payment and transaction apps and digital currencies, because students have already heard about them.
“You better talk about cryptocurrencies,” he said.
How can I tell if the personal finance instruction at my local high school is of high quality?
The University of Chicago’s Financial Education Program created toolkits to help parents and teachers evaluate instructional materials on personal finance and advocate for their inclusion in the classroom. The toolkits include questions to help determine effective programs and suggest asking whether the materials include marketing from financial institutions or products, for example, or whether they have been examined by an independent evaluator.
