Submission by Guest Author
Financial literacy is vital to success in life and should be a part of any young person's education. By learning how finances work, young people will understand how, and why, to plan carefully as they make key financial decisions later in life.
Why Financial Literacy Should Be Taught in Schools
Failure to acquire financial literacy can lead to catastrophic crises, such as bankruptcies, foreclosures, evictions, homelessness, inability to cover emergency expenses, inability to obtain desired medical or dental services, and other dire yet avoidable scenarios.
Conversely, acquiring skills in personal finance management can enable one to enjoy financial stability and earn exponentially more — through long-term investing — than one can from one’s salary.
Financial literacy empowers an individual to live happily, healthily and securely throughout his or her life. Consider financial security impacts every facet of life including:
● Career choices
● Stress levels
● Home Buying and renting
● Raising children
● Dining, travel and entertainment
● Health care
Understand How the World Works
Financial literacy also includes understanding how financial markets work. It will need to cover stocks, bonds, mutual funds, ETFs, and commodities, as well as the world’s great exchanges, like the London Metal Exchange, the Chicago Mercantile Exchange, and Intercontinental Exchange.
Such an education will also include the various instruments that can be used for investments, such as options, futures, and other securities. And it should include basic ways that students can analyze their investment choices such as comparing real estate investments to gold.
Understanding these things will help students better grasp the meaning of national, regional, and world events. And it will provide the groundwork for a lifetime of delayed gratification — saving and investing.
Stability of a Nation
Sounds finances also bolster the stability of a country. For example, research shows that the most stable societies are those where the majority of citizens diligently save and can therefore provide for themselves in emergencies and in retirement. The latter is particularly important, as with health care advances, people are living longer and need a larger “nest egg” than in decades past, in order to retire comfortably.
Savings rates vary between nations: China has one of the world’s highest rates, its citizens save an average of 25% of each paycheck. By contrast, Americans are an average of over $90,000 in debt. But during the uncertainty of the pandemic, the average savings rate of Americans reached over 32%. By contrast, their savings rate averaged between 6%-8% over the preceding decade.
That said a nation’s debt also plays a factor in the stability of a nation, and helping students understand America’s debt can help them become informed voters.
Understanding financial markets, including how commodities and stock exchanges work, as well as securities, is essential.
In a survey conducted by Credit Karma and Qualtrics, 63% of participants said they wanted financial literacy taught in schools.
Yet, while there's great consensus about the need for financial literacy in education, opinions on how, exactly to implement that objective vary. For instance, in that survey, roughly one-third each of respondents believed financial literacy education should begin in elementary, middle or high school, with small outliers, comprising about 5%, believing it should begin in college.
Steps for Implementing Financial Literacy in Education
In 2007, the Consumer Financial Protection Bureau published, "A guide for advancing K-12 financial education" to help resolve some of these questions and to help educational institutions implement such programs. In this report, the authors parse the daunting project into a sequence of digestible actions:
Financial literacy education must be implemented equally and uniformly across all districts and economic spectrums if it is to truly be effective in uplifting and securing the future of subsequent generations.
Next Gen Personal Finance published a report in 2018 called, "Who Has Access to Financial Education in America", which found that, in the poorest areas, the percentage of students required to complete a personal finance course in order to graduate high school was the smallest.
For instance, access to technology plays a major role in how effective such a program can be in any given community. Many banks and brokerages now have mobile apps their customers can download onto their smartphones and mobile devices. In many cases, these apps include tutorials not only on utilizing the functions of the software but on better managing one's personal finance, from keeping a checkbook to creating a budget and saving and investing.
Digital tools, like ClassCast Podcast create on-demand content giving students an even deeper dive into some of the more specific topics and challenges they may face in their financial education and lives.
Using financial apps and digital tools, however, requires a means with which to use them. Despite the ubiquity of smartphones, some students still don't have them. Many don't have computers at home either, or ones they can access or that have access to the internet. All of these technological obstacles must be overcome in order for students to have equal access to learning financial literacy using these tools.
Ways schools and districts can support greater access to the technology needed to run financial apps include:
The Role of Games
There are currently many games on the market, such as CashFlow, that provide a fun, engaging way to learn about financial management and to be rewarded for making the right choices.
Games provide an immersive, playful experience. Players get immediate feedback and learn through iterative actions and benevolent competition.
Importantly, academic research shows that games are effective educational tools.
Conveniently, there are financial games available for all age levels. Some games are designed to be played in the classroom. Some are downloadable apps. And others are designed to be played online in a browser.
Here are some examples of popular games:
In Summary: A Team Effort
If basic financial skills aren't taught in schools, where else will students learn them? Unless parents take on teaching their kids financial literacy or individuals seek it out themselves later in life, schools are the only places where these vital skills may be instilled.
Incorporating programs teaching these skills into classrooms requires the focused and combined effort of teachers, administrators, students, parents and the community at large. As the Wisconsin Department of Public Instruction laid out, it requires a clear mission and vision and must be relevant, learner-centered yet community-focused and connected to the standards of the educational system. It must also be properly integrated with other curricular areas, supported with sufficient resources and continuously evaluated and adjusted for effectiveness. If done right, however, schools can help their graduates go on to lead happier, healthier and more secure and prosperous lives.
"Closing the Financial Literacy Gap"; Laura Zingg, Teach for America
"Resources and Downloads for Financial Literacy"; Edutopia
Because no one else