July 3, 2017
Well, there is some bad news, and there is some good news. The bad news is that the emphasis on financial literacy has been significantly lacking in this country, and we can see the results in testing. On the positive side of the ledger, we might be at an inflection point. And in the meantime, there are a number of ways parents can work with children to improve their financial knowledge in the absence of full scale curriculum.
We have been losing ground in recent years. Currently, only 17 states mandate a single personal finance class for high school students, according to a report from the Council for Economic Education. Only 17 states require a single class for high schoolers, to say nothing of the lack of access to financial education for elementary and middle school students. The same report also notes that access is actually on the decline. Just 20 states required high school students to take a course in economics last year, down from 22 in 2014.
As a result, financial literacy is suffering among American kids. One financial literacy test, administered by the National Financial Educator's Council, found that students between 15-18 scored an average of only 59.6%. A 2012 test of financial literacy among students around the world found one in six students in the United States is financially illiterate, failing to reach the baseline level of proficiency, and that American students are in the middle of the pack when it comes to their financial knowledge and proficiency.
I hope we are. The good news is that states are beginning to question the current path, so perhaps the tide is turning. For the first time in years, one state is making positive move and requiring a financial literacy curriculum. Not a class, but a curriculum. In Wisconsin, the State Assembly passed a bill that will require every school board in the state to adopt academic standards for financial literacy and incorporate instruction in financial literacy into its curriculum for K-12 students. And, in the current era of polarized politics, the bill passed with bipartisan support! The bill is expected to pass the State Senate later this year and be implemented for the 2018-2019 academic year.
Obviously, it depends on your child’s age, but here are a few things you can do. With young children, it is about teaching amounts and assigning value. At the Ariel Community Academy, a school that my company supports in Chicago, we start by working with young students to assign value. We ask them if they would trade a cupcake for their toy, for example. When young children are learning how to count, you can teach them to count with money, and have them pay the cashier when you go shopping to understand the exchange of money for items. It is also good to teach children about donating and sharing when they are young. Ask them to give old toys to less fortunate kids, or commit to saving a percentage of their allowance for charity.
Last week, we talked about summer jobs. Earning their own money is a great way for older kids to learn about financial responsibility. Introducing the concept of a credit score when they are teenagers is also important, be it through a cash-backed credit card or a carefully monitored credit line that they must monitor and pay every month. Finally, teaching your children the concept of investing – what stocks are, what bonds are, how to follow stock prices, the power of time and compound interest – is a great way to start them off on the right foot, financially speaking.
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