As any parent or teacher knows, the sooner you introduce a young person to a concept – be it math, manners or foreign language – the more opportunities they have to grab hold and learn.
The same is undoubtedly true in the realm of personal finance. According to a report from the Council for Economic Education, “Students from states where a financial education course was required had the highest reported financial knowledge and were more likely to display positive financial behaviors.” Compared to other students, personal finance course grads were more likely to save, less likely to max out credit cards, less likely to make late credit card payment, more likely to pay off credit cards in full each month and less likely to be compulsive buyers.
As the data shows, students formally educated in personal finance make for smarter, more responsible consumers down the line. The problem is, by and large personal finance education is not a part of the required curriculum in U.S. schools. As the Council for Economic Education reports, in 2011, policymakers in just 22 states had enacted laws requiring high school students to take an economics course as a graduation requirement and only 13 states required students to take a personal finance course.
With over half of schools not requiring personal finance education, it’s truly tough for American children to grow into financially literate adults. While parents can certainly take on the challenge of teaching money matters at home, there is something to be said for formal personal finance education.
Financial literacy is one of the challenges the Consumer Financial Protection Bureau was tasked with upon its creation in 2011. In a financial literacy report published in July of 2013, the organization made a number of recommendations on how we can improve personal finance education for young people in the United States.
- Introduce key financial concepts early on. The idea here is that by teaching younger children personal finance concepts, educators are able to build on that foundation throughout middle and high school.
- Include personal financial management questions in standardized tests. Testing personal finance concepts would hold schools accountable for that curriculum. In 2011, only 16 states required testing in the subject of economics.
- Provide opportunities for students to practice money management. Experiential learning allows students to learn by doing, and can be more compelling than reading those concepts from textbooks.
- Create opportunities for teachers to take financial education training. The more training teachers have in this subject area, the more knowledge they can pass on to students in the classroom.
- Encourage parents and guardians to discuss money management at home. By supplementing classroom content with at-home conversations, parents are able to reinforce positive financial behaviors.
If you want to teach your child personal finance habits at home, we have a number of tips on talking to kids about money. For more resources on teaching children of all ages about responsible personal finance habits, check out our full family and money series.