There has been a notable push of late to get younger Americans more fluent in their finances and to make financial literacy a mainstay of the school curriculum. And things are happening.
As it stands, 45 states require personal finance education to be included in the K-12 standards, with 37 requiring personal finance at a district level. While this is a good start, more can be done as only 6 states require a standalone high school personal finance course to be taken and 5 states require standardized testing of personal finance concepts.
The more states that take up the fight for financial education in schools and better financial literacy writ large, the better. Don’t believe us? Finder asked 7 experts for their input on financial literacy and why it should be taught.
7 experts’ advice on the importance of financial education
1. Anna Barker, Founder at LogicalDollar
“Financial literacy is incredibly important for ensuring you’re ready for anything, whether it’s to address a short term money-related curve ball or to secure your financial future in the coming years.
As the events of the past 18 months have shown us, you never know what’s around the corner – and what the cost of that event will be. Something completely unexpected can throw your life into disarray but, in many cases, having the funds available to deal with this problem can be a huge factor in how you get through it. Similarly, laying the foundations now for your retirement gives you the best chance to be comfortable during your post-working years. Whatever your focus at the moment, both cases show how practicing financial literacy now through effective money management can position you as favorably as possible for what lies ahead.”
2. David Aylor, Founder & CEO of David Aylor Law Offices
“Financial literacy is arguably one of the most important life skills we need, yet schools fail to teach children and young adults how to manage their finances properly.
Without a base of solid financial knowledge, people can make poor decisions that lead to legal issues like asset foreclosures and bankruptcy. In the worst cases, desperate people turn to theft and other law-breaking activities to push back against the system and make ends meet, which can end in a criminal record that makes finding a good income even more difficult. Teaching financial literacy early gives young people the tools they need to manage their money for a lifetime.”
3. Todd Tharp, Chief Financial Officer at USE Credit Union
“A person’s wellbeing is often attributed to a solid understanding of ones personal finances and how finances fit into the larger picture of life. Just like annual checkups with your doctor can keep one on a healthy course, regularly reviewing the performance of your finances and finding ways to improve them can help you lead a more financially healthy life.
Like the saying, eating an apple a day will keep the doctor away, a fundamental for leading a healthy financial life is learning the importance of budgeting, saving and spending money. This foundation will make it easier to navigate important milestones, such as entering college, starting a family and being ready for retirement. Take advantage of the financial programs that credit unions offer as these programs are an opportunity to learn more about your finances and help you through each step of your financial journey.”
4. Dr. Jim Schultz, Host of From Theory to Practice on tastytrade
“Despite the fact that most children and young adults are not exposed to any type of formal financial education until college, financial literacy is critically important. Regardless of fields of study or career paths, the desire for financial well-being is a common goal that we all share as adults. Whether it be building a portfolio or saving for retirement, we all want to accumulate some level of assets, and the only way to achieve that is to have a base level of financial market awareness.”
5. Jane Sardoma-Susaeta, This Mama Blogs
“I believe that financial literacy is very important, and it should be every person’s goal. Financial literacy enables people to make informed decisions about their finances. It allows people to know how much they bring in and spend each month and helps them avoid unexpected financial pressures down the line. It’s the key to understanding things like taxes, taking out loans, or planning for retirement and so much more! If you don’t have at least some basic understanding of these topics, you could easily be taken advantage of and wasting your hard-earned money.”
6. Jonathan K. DeYoe, AIF® & CPWA®, President & Wealth Advisor at Mindful Money
“Financial knowledge is necessary to make good decisions about spending, saving, investing, using retirement plans at work, borrowing for a home, college choices, debt management and everything else. But knowing what we should do and doing what we know we should do are two entirely different things. I know that I shouldn’t have ice cream every night… but I am pulled towards the freezer at about 8 p.m. most nights. Some nights I do it, some nights I don’t. I know the consequences in terms of both my health and my lactose intolerance… but many nights I still indulge. This is not a problem with knowledge – it is a discipline issue or a habit problem or a short-term thinking weakness – I don’t have the strength to say no sometimes. Much the same is true in personal financial management — but the enemies of financial success are far more numerous and nefarious than the ice cream opportunities in my freezer.
If we just teach, the lessons are forgotten. If we teach and then provide ongoing support until the teaching becomes a practical habit, the outcomes are much better.
Financial literacy is a necessary first step, but it isn’t sufficient for improving lifetime outcomes. We need to provide ongoing financial habit building to really benefit real people in the real world.”
7. Mark Nicholson, Match Financial
“With so much revolving around personal finances, you might say literacy is essential. Nearly 40% of Americans can’t handle a $400 emergency expense such as a car repair, over 50% live paycheck to paycheck, and almost as many carry credit card debt. According to research at the Global Financial Literacy Excellence Center (GFLEC) with support from PwC (PricewaterhouseCoopers) it was found that only 24% of millennials demonstrated basic financial literacy. As debt among Americans continues to grow, so does the need for financial literacy. Over the last 10 years consumer debt has increased over 30%, and increases at the rate of about 2% annually.”
8. Jacob G. Sensiba, Investment Advisor, CRG Financial Services, Inc
“Financial literacy is incredibly important. If people don’t get educated about certain financial topics (credit, debt, saving, investing, taxes) they are setting themselves up for failure. If you don’t save for the future, your retirement nest egg will suffer. If you don’t save for the future, your emergency savings are non-existent. If you don’t have emergency savings, you’ll have to finance an emergency with a credit card. Then the debt will pile up. You need to be able to navigate the world with solid financial understanding. Everything requires money (a place to live, transportation, food, internet, clothes, etc.). It’s not the end all, be all, but knowing how to save money, invest, and stay out of debt is so incredibly important. People who aren’t financially literate will learn through experience. Often that experience is negative and sets them back. That’s what happened to me. I wasn’t taught what I needed to be taught, so I learned after years of spending recklessly and getting behind financially. Learn from others’ mistakes.”
Does financial literacy impact credit card debt?
Maybe? We can’t chalk this one up to financial literacy wholly, after all, correlation doesn’t equal causation but it’s worth pointing out that the average credit card debt in states where personal finance education is required in the K-12 standards is $5,114. In states without the requirement? $5,387.
It’s a similar story for personal finance requirements at high schools. The average credit card debt in states that require the course is $5,059, compared to $5,158 for states that do not. In fact, of the states with the five lowest average amounts of credit card debt, four require either a standalone high school course on financial literacy or require coursework integrated into another course in high school.
Financial literacy requirements by state v.s. credit card debt
|State||Included in the K-12 Standards||Standards Required to Be Implemented by Districts||High School Course Required to Be Offered||Standalone High School Course Required to Be Taken||Required Coursework Integrated into Another Course||Standardized Testing||Credit card debt|
|District of Columbia||No||No||No||No||No||No||$5,671|
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