While schools are right to focus on teaching kids the basics of reading, writing, math and science, the signs we desperately need to teach personal finance earlier in life are everywhere. After all, average savings rates are absolutely paltry across the board, and several studies (including this one) show most Americans aren’t investing enough (or regularly enough) to retire on their own terms.
Credit card debt is also a major problem, as are student loans, and the surging costs of monthly car payments. By offering personal finance education in schools, states and municipalities can prepare future adults to make smart financial decisions when it matters most.
Some states have even passed legislation requiring finance education in schools, and several celebrities are offering their own programs. For example, Philadelphia 76ers superstar James Harden announced he’ll use his nonprofit — called the Impact 13 Foundation — to increase financial literacy rates among young adults.
With all this in mind, we have to wonder if these programs are actually effective when it comes to helping kids learn about money. We should also be concerned that some of these programs are actually being designed as lead generations for wealth management firms.
There are a lot of strong opinions when it comes to kids learning about money in school, and exactly who should teach these courses if they’re offered in the first place. I reached out to several experts to get their take on financial literacy programs in schools, and here’s what they said.
Financial Literacy Programs Teach Essential Life Lessons
Debbie Pierce, who serves as the President and CEO of Economic Literacy Colorado, says that the life skills taught in personal finance courses will ultimately be used by all students throughout their lives, whether they know it or not. For example, everyone will eventually have bills to pay and budgets to manage, and everyone will eventually hope to retire one day.
“If school is to prepare students for life, why isn’t personal finance an essential class?” she asks.
Pierce adds that students who do not learn about personal finance in school have a slim chance of being taught financial essentials at home. Ultimately, this leaves too many students falling through the cracks and having to learn in the “School of Hard Knocks,” she says.
Unfortunately, there are often challenges when it comes to finding instructors for the courses. Pierce says the biggest challenge in Colorado is not having enough teachers to teach the essential classes in many school districts, “much less the elective classes.”
She adds that this is especially true in rural districts, which make up 75% of Colorado school districts.
Financial Education Is Essential For Our Changing World
Dr. Jaime Peters of Maryville University points out that so many of the financial lessons from the last 100 years no longer apply. As an example, Dr. Peters says that individuals are now in charge of their own 401(k) plans, whereas workers years ago had pensions to count on. On top of that, dollar bills have been replaced with debit and credit cards, and direct deposits and automatic payments make it easier to spend and more difficult to track our total spending.
“It is no longer what is in your wallet – it’s what’s in your app,” she says.
With this in mind, the way technology has changed our financial system has made financial literacy into a “critical life skill,” she says.
We are using money differently, yet kids still need to learn financial basics such as “paying yourself first” and living below your means. Without financial education in schools, kids may never learn these lessons at all.
Financial Literacy Programs Are Not Perfect
That said, Dr. Peters says that financial literacy programs suffer from the same fate as so many other well-intentioned programs.
“It is good content at the wrong time,” she says.
For example, high school students are not in the market for credit cards or mortgages. And while college students may have jobs and car payments, “they are far from needing to know the ins and outs of how to pick the proper health insurance.”
However, it’s possible that lessons learned about finance in school can stick with students for years until they need them. So, students who go through financial programs may not know exactly how to navigate finance as an adult, but they may gain a basic understanding and be more confident in asking questions, says Dr. Peters.
Financial advisor Josh St. Laurent of Wealth In Yourself adds that sometimes the length of the program is an issue too, and that half-day financial literacy workshops are often not enough.
“A few hours of charts and graphs is insufficient to influence behavioral change in students,” he says, adding that there needs to be a real world component where they can test concepts with their own money and through their own real-world lens.
Financial therapist Lindsay Bryan-Podvin, who is the author of The Financial Anxiety Solution, adds that some school-based programs put too much emphasis on tactics, definitions, and rules, and not enough on managing money in real life, including the emotions and money stories that come into play.
She adds that this is similar to health education in the United States. There’s more emphasis on what health is, yet our health outcomes aren’t that great.
“You can teach someone that fruits and vegetables and daily walks are good for them, but if they live in a food desert where it’s unsafe to go for walks, it doesn’t do much good,” she says.
Some Conflicts Of Interest Exist
Some might also be weary of financial firms creating programs for schools, and for good reason. After all, a financial advisory firm could easily tailor in-school financial education in a way that it creates leads for them in the future, or at least introduces young people to their brand early on.
As an example, MassMutual offers FutureSmart — a national initiative that teaches financial lessons to middle and high school students, as well as families and educators. They point to findings in a study from Journal of Financial Counseling and Planning as some of the core reasons financial education in schools is necessary, including the fact that 90% of students who took a one-time FutureSmart course “experienced knowledge gain.”
Potential for conflicts or not, it does seem like a natural fit for financial firms to create financial literacy programs — at least, as long as they’re not built to push specific financial products. For example, FutureSmart curriculum includes information on “how to achieve important goals around saving money, budgeting, education, and career planning.”
These lessons can be useful for any student who is eligible to participate, regardless of which company is helping pay for the program.
While financial literacy courses offered in schools may not be perfect, most experts seem to agree they’re better than nothing. And for some students, the lessons on budgeting or saving they learn in school may be the only financial education they ever receive.
Ultimately, that’s why some states are pushing to make financial literacy mandatory, and why more states will likely follow their lead. Regardless of how imperfect these programs are, or who pays for their creation, all of society benefits when young people get the chance to learn financial basics they might not learn at home.