Most Americans aren’t fluent in the language of money. Yet we’re expected to make big financial decisions as early as our teens — Should I take on thousands of dollars of student debt? Should I buy a car? — even though most of us received no formal instruction on financial matters until it was too late.

While no course in personal finance could have prevented many Americans from getting caught up in the housing bubble, it’s clear that most of us need some help, preferably starting when we’re still in school. And I’m not just talking about learning to balance your checkbook. It’s understanding concepts like the time value of money, risk and reward, and, yes, the importance of savings.

All of this raises the question: What’s happening inside our classrooms? And how many schools even broach the topic? As it turns out, for a country that prizes personal responsibility, we’re doing very little.

“We need to teach the basics of economics and finances so people can make financial decisions in a changing world,” said Annamaria Lusardi, economics professor at Dartmouth College and a research associate at the National Bureau of Economic Research. “It’s the compounding of interest, the problem of inflation. These are the principles. And these are really scientific topics.”

While more states are beginning to require some sort of personal finance instruction, there aren’t enough that do, financial literacy experts say, and there is little consistency in the quality of the education. Just 13 states require students to take a personal finance course, or include the subject in an economics course, before they graduate from high school, up from seven states in 2007, according to the Council for Economic Education. Meanwhile, 34 states (including the 13) have personal finance within their curriculum guidelines, up from 28 states in 2007.

But that doesn’t guarantee that the subject will be taught. It’s no secret that state budgets are tight, and courses not seen as core are more likely to be cut than added.

“The adage ‘If it isn’t tested, it isn’t taught’ is unfortunately true in this case,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis and acting president of the Council for Economic Education, which provides economics and personal finance educational programs.

But that hasn’t stopped enterprising teachers like Mathew Frost, who teaches 11th and 12th graders American history and economics at Sunset High School in Dallas, from working the topic into his student’s school day. The Texas economics curriculum carves out time for personal finance, but it doesn’t test students on the material.

Frost says it’s just too important to ignore. So he tries to bring the lesson to life for his students by pairing them as married couples and giving them a couple of children. The students must then create a budget based on the average income range for their neighborhood, or about $21,000 to $40,000 a year. Similar to the board game “Life,” the students are dealt real-world circumstances. Frost has them randomly pick “chance cards” from a bag, which might tell them they need new brakes for their car, broke an arm, suffered a death in the family or found $20.

Research shows that this type of financial education tends to resonate with the students later.

Michael Gutter, an assistant professor of family financial management at the University of Florida, studied the issue in 2009, after he surveyed 15,700 students at 15 universities who came from states with different (or nonexistent) personal finance schooling requirements. The study was financed by the National Endowment for Financial Education, a nonprofit organization in Denver that provides financial education curriculums.

“College students who came from states where there was a course required were more likely to budget, were more likely to be saving, and were less likely to have maxed out their credit cards in the last year and were more likely to be paying off their credit cards fully,” Gutter said. But his research also suggested that “social learning is also very powerful as well,” he said. “What your parents tell you matters.”

Similar Posts:

Share