Teaching financial savvy

With so many Americans defaulting on mortgages and crushed by credit card debt, the campaign to require “financial literacy” for high school students is growing, reports MarketWatch.

Utah, Missouri and Tennessee require a one-semester personal-finance course, according to the JumpStart Coalition for Personal Financial Literacy. Another 17 states require personal finance to be included as part of another class, such as economics. What’s taught varies widely.

One thing is clear: Students in many states don’t get financial education. High-school seniors answered just 48% of questions correctly, on average, on a 31-question personal-finance survey by JumpStart in 2008. And that’s down from an average of 52% correct in 2006.

I’m reluctant to add more mandates to the curriculum. Perhaps if more students learned arithmetic, they’d be able to figure out how much they can afford to pay for housing, utilities, car payments, insurance, etc.

Update: Some Baltimore middle schools give students small amounts of money for good attendance and grades; students invest the money in stocks and track their returns or losses.  Stocks in the Future was developed by Johns Hopkins.

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  1. Well, I know that I never had financial literacy taught to me in the 60’s. It’s a skill one picks up as an adult by living within a budget, balancing a checkbook, and generally being responsible for oneself and others.

    What’s changed that we need to teach this in schools? I think that teaching basic economic theory would be more useful.

  2. I’d like to see how adults did on that personal-finance survey. I bet it wouldn’t be much higher.

  3. Rex, firstly, people vary considerably in their intelligence. Just because you could figure out financial literacy doesn’t mean that everyone else is intellectually capable of doing so.

    Secondly, people have been getting themselves into financial trouble for centuries. Look at the lives of the British aristocracy. So I don’t think anything has changed that means we now need to teach it in schools, rather that it always would have been a good idea to teach financial literacy. What probably has changed is the media coverage.

  4. I don’t really think arithmetic is sufficient (necessary, yes, but not sufficient). I think people really need to understand compound interest. Not necessarily be able to compute an amortization table by hand (which I did learn in a math class in the 80s), but have seen one and understand what it means, and have an idea what benefits compound interest has for those who start saving early, etc…. Show them what happens when you’re in debt on credit cards and only paying the minimum, and your balance keeps going up, even though you’re making payments and not even putting anything else on the card!

  5. Margo/Mom says:


    Whether or not something has changed to make this skill a required one or not strikes me as irrelevant. Some things, have, however, changed. One is the immediacy of bank information regarding bank balance, available balance and what items have cleared and when. There may have been some gradual changes affecting who loans money and various motivations. It’s something to think about when purchasing a car with dealer financing. It is very easy to get lost in the manipulation of price, rebate, monthly payment, interest rate, trade-in value, down payment and number of monthly payments.

    Additional changes include debit cards, the availability of high interest credit cards to (possibly uncredit-worthy) eighteen year olds, “pre-paid” credit cards, the proliferation of bank charges and the emergence of a paycheck loan industry. Bill payment–while still accepted in cash by some vendors at some places–is likely to be conducted online directly from the bank, initiated from home-software, or by electronic funds transfer initiated by the vendor.

    Usury and loan sharks are certainly nothing new. They have been preying on poor people throughout history. And, while a shell game is a shell game is a shell game, every decade brings with it new ways of dressing up the old bait and switch or sleight of hand. Legislation has been kind to the usurers of late. We owe it to our young people to give them a fighting chance.

  6. tim-10-ber says:

    I think this is a skill set that should be taught beginning in kindergarten. My son had something like this with AR in third grade. Now Tennessee is being held up as a state that is requiring a financial course…geez…this is not for this year’s graduates. I think it is for graduates a few years from now.

    Junior Achievement has a great course for 5th and 6th graders and there are other programs done for all ages of kids. This can be an enrichment program not designed to take away from core class time. With most of Nashville’s comprehensive high schools going to block schedules this could easily be added as part of a math class or during advisories…

    I still believe the younger the better for learning financial skills and then increasing the knowledge as kids grow. So many kids get some type of allowance today. They are learning these skills at home. Others…have no clue how to manage money, read a contract (much less what a contract is), read the fine print on credit card contracts, understand leverage and that credit is truly DEBT.

  7. Lightly Seasoned says:

    Math ability doesn’t seem to have much to do with financial savvy.

    Beware unfunded mandates. This law has required the addition of two teaching slots in my building, paid for by the good residents of this district. That’s two teaching slots not going to core subjects.

  8. Momindant says:

    No more mandates, please! Credit problems aren’t caused by a lack of financial skills as much as a lack of character, the inability to defer gratification of desire rather than indulge oneself immediately.

  9. I agree with Momindant the the real issue is not that people are ignorant but that they’re greedy. My dad has a good friend who is a business school professor. He’s got a JD, MBA, and PhD. from one of the top universities in the country but he is currently upside down on a house he’s owned for over 15 years. He kept refinancing and cashing out the equity to finance a more lavish lifestyle than he could afford on his salary. The problem wasn’t a lack of knowledge but a lack of willpower to live within his means.

  10. What I know about finance I learned from my father and reading the paper.

    Up until a few months go I would have said, reading a daily newspaper including the business section would be enough to create financial literacy in anyone, but now that newspapers are collapsing I do not think TV, radio or the internet will fill the gap the newspapers are leaving.

    Schools do such a poor job teaching everything else I imagine them putting kids to sleep when they discuss personal finance.

    No sort of education, training or media is going to prevent the kind of financial hysteria we are experiencing now.

  11. Schools do such a poor job teaching everything else I imagine them putting kids to sleep when they discuss personal finance.

    Just stop. You don’t know what you’re talking about. Of course, given that you thought the business section would create financial literacy, I’m not surprised.

  12. As a teacher in a neighborhood overflowing with check-cashing storefronts and no banks to be seen, I was keen on incorporating financial lesson plans into my teaching. As an 8th grade algebra teacher who needed to catch her students up on more than just the topic of the day, I chose financial lessons as the frame for reviews on other basic lessons. It was as simple as showing ads and creating “mind games” for kids to quickly calculate a discount… or understanding the value of interest and the price it cost to cash a check at the bank vs. the corner store.
    Then again, I consider myself fiscally conservative and would like to pass on these money awareness issues to others.

  13. Mike,

    I learned a lot more biology just by going to the library for a few weeks than the year I spent in my high school biology class. I learned more math preparing a 1 hour presentation for a senior English class than I learned in 4 years of high school math. It was not about high school math.

    I will say it again. Our educational institutions take interesting ideas and turn them into dull mud.

    I am glad you did not have this experience, but I can find a lot of people here at work and most of those I knew in the Army who back up my point of view.

    About business, what is there to learn?

    Keep in mind that many of the builders of technology and business did not have MBAs or even college Degrees. Carnegie, Edison

    avoid leverage.
    buy low and sell high
    avoid high fees
    understand what you are investing in
    make sure you can afford to lose what you invest.
    I read this all in the papers a long time ago.

    If our current business wizards had followed this they would have avoided catastrophe.

    There is no need to take simple things and make them difficult, but that is what our schools often do.

  14. I guess my point is that unless you know what changed in society, you can’t develop and structure a valid curriculum, if teaching these skills in high school is really the way to go. Perhaps it should be a required course at community colleges and/or four-year schools instead. I’m not at all sure I would have understood the basics in high school, or maybe not even college. It wasn’t until I had a regular job & checking account that any of it really *meant* anything to me.

    Of course, I could say the same about trying to understand history while in high school–I had no frame of reference for most of it, and I couldn’t distinguish the BS from the reality.

    I mean, come on, really, Colombus sailed the ocean blue out into the great unknown just to find spices to make food taste better?

    But it wasn’t something I really thought about too much, until my father mentioned that the critical spice was pepper, and to consider that meat, as it starts to go bad, has a several day period where it smells slightly unpleasant but can still be eaten without ill effect.

    Disguising the taste (or in some instances enough pepper actually acts as a preservative) is the economic equivalent of two days worth of refrigeration at a time when there were no refrigerators.

    Now it makes sense!

  15. I learned to balance a checkbook from my father, not from the schools. I guess those kids with innumerate parents entered adulthood grossly unprepared…

    “I’m reluctant to add more mandates to the curriculum. Perhaps if more students learned arithmetic, they’d be able to figure out how much they can afford to pay for housing, utilities, car payments, insurance, etc.”

    And perhaps if the math problems concerned something the kids understood mattered, they’d learn arithmetic. IIRC, in the McGuffey Reader era, most of the math problems concerned matters of practical everyday life. I haven’t seen the higher grade curriculums, but considering how early they started problems involving multiplication and division, they should have been doing compound interest by 8th grade – and it would have been needed, because at the two-room school where my father went through grades 1-8, only a few brainiacs would go on to high school, so the primary goal was to ensure 8th grade graduates could handle the accounting and business aspects of farming. (Not that anywhere near all of them met that mark in just 8 years; the kids repeated grades until they passed or turned 16 and could legally drop out…)

    Of course, very few of us care anymore about how many bushels of wheat a wagon will carry, but there are plenty of calculations a modern family should be making if their paycheck is going to last to the end of the month, and it wouldn’t hurt the teaching of math at all to use such things for the practice calculations. Evaluating whether mortgage payments will fit into your budget only requires third-grade arithmetic – and understanding that certain types of mortgages mean the payments will be going up doesn’t even require that!