Tax breaks, savings credits, and fabulous graphs of the Presidential tax plans are all the rage, but I think the root cause of the money management problem in our country is the complete lack of financial education.

Our schools don’t teach a comprehensive financial program (or anything in most schools), and many parents don’t teach their kids either. Some parents would love to teach their kids but because they don’t know how to manage their own money, they aren’t empowered to do so. It a vicious cycle, but it’s a nationwide problem.

It was great timing that a group of writers are answering the following question today:

“What is the single most important initiative that the next administration should undertake to improve the economic health of the U.S. middle class?”

The great thing about financial education, is that it doesn’t have to be a politically charged topic. Either party could pursue it, including our middle class VP candidates. The downside is that it’s a long term plan. Education of today’s youth won’t make changes overnight. It will however, empower the youth of today to make a difference in the future.

Kids Personal Finance Stats

Looking for proof that kids today need a better financial education? Look no further than the financial literacy scores released earlier this year (taken by High School seniors):

  • 48%: Correct answers to the questions!
  • Only 40% correctly answered that they could lose their health insurance if their parents become unemployed.
  • 40% correctly said that paying only minimum on a credit cards will pay more in finance charges than paying the balance in full.
  • A shocking 17% correctly answered that stocks will likely yield higher returns than savings bonds, savings accounts, and checking accounts over the next 18 years. (There has never been an 18 year period where that didn’t happen.)

You can download a copy of the survey and see all the results at Jump$tart Coalition.

Current Personal Finance Requirements

There are lots of fantastic books, teaching tools, and articles about teaching kids about money. But who is requiring the learning? Here’s a look at the individual state requirements per Jump$tart:

  • 3 states: Require 1 semester of personal finance class.
  • 17 states: Require personal finance material incorporated into another subject.
  • The rest: No requirement!

Money Management Curriculum

I would love to see a comprehensive money management curriculum. Not just a semester in high school, but education at all levels. Money management is learned over your entire life, and it evolves. Introduce the basics in elementary school, expand on the concepts throughout middle school and include a capstone course in high school.

Cons to Personal Finance Education

As with all pros, there are cons. Here are some typical ones that might come up:

Kids that don’t care.
JD took a personal finance class and got F’s on all his papers, because he just didn’t care. Although, many kids don’t care about the other classes either.

Teachers aren’t equipped.
Good point. Teachers probably aren’t the best qualified teachers on personal finance. Maybe we could look into volunteers or sponsor passionate personal finance people. I don’t have all the answers, but we shouldn’t let that stop us.

Resources for Teaching Kids about Money

What do you think? Am I right or wrong?

Check out how others answered the same question:






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Comments to Improving Middle Class Finances Through Education

  1. I was quite appalled that the only business related degrees in my UNIVERSITY that required you to know the basic time value of money functions were the Business Finance ones. Business Management, Supply Chaining, and even Accounting majors only just barely touched on the subject, and college seniors in one of my capstone classes who worked with me on a project (who were from other majors) were really struggling with being able to calculate basic investment returns or loan terms. Time Value of Money, like investment returns, future value of annuities, and components of loans, should really be taught in high school or earlier, along with Algebra, not to just a few select college students.

    Rassah

  2. I think money education would be very important. Maybe not necessarily for kids, but by the time most people reach college, it is something they are interested in.

    More adult classes would be good as well. We’re teaching our son about money, but I know some folks who would do well with a little course on money management before they started teaching their kids.

    Miranda

  3. I completely agree that people our country don’t have enough financial education. My boyfriend is taking a Personal Family Finance class in college and learning all those basics, but he chose to take it as an elective, and many people aren’t taking a class like that. I received zero financial education in school. I took AP Honors Economics my senior year of high school, and studied complex supply/demand curves and how to calculate GNP and GDP, but nothing on balancing check books. It’s a shame — I hope one of the backlashes of this crisis is more financial literacy.

    Emily

  4. Hi. I’m a first-time reader. I found your site through CashMoneyLife. I work for a non-profit credit counseling agency. We work with a program called Junior Achievement. It’s an international program with local chapters almost everywhere. JA goes into schools to teach about money and business to kids in elementary through high school. In our area schools are cutting the JA program because they have too many things to teach for the Pennsylvania State System of Assessment tests required by No Child Left Behind.

    Kids need good financial lessons. Too many don’t get it at home, but the schools are overwhelmed with things they have to teach and do for the kids. It’s a real problem.

    My agency can’t even get the local colleges to let us do free talks to the students about using credit cards wisely and understanding what a credit report it. It’s very frustrating.

    Kristen

  5. I could not agree more with your take. Our educational system needs reform and the habits begin at an early age. We need more programs that help kids develop positive habits with credit and money.

    Mike Young
    http://www.thesecurestudent.com

    Mike Young

  6. I think the basics should be incorporated (balancing a checkbook, how interest works (pos or neg), etc) should be worked into existing classes. At around 15 I think there should be a class that focuses on how to read a pay stub, fill out taxes, and FICO scores.

    sara l

  7. I am currently teaching a semester-long class that covers topics including paychecks and taxes, savings, investing, money management accounts (checking, savings, money market accts., savings bonds, certificates of deposit), leases, food purchasing, transportation costs, electronic banking, managing credit, child care costs, insurance, identity theft, parenting-the rewards and responsibilities.

    The class is made mandatory by our local school district because the state of Pennsylvania has a state requirement for the curriculum to be taught at least once during the high school years. The subject area that I teach is FAMILY AND CONSUMER SCIENCES, it is often confused with the former Home Economics, it’s not. We are always working to fight against our former image.

    What makes FAMILY AND CONSUMER SCIENCES the perfect class in which to teach this content, is the fact that it’s taught in the context of the family/household management rather than from the business model. Hands down the best curriculum that I’ve found for this course is Family Economics and Financial Education http://www.fefe.arizona.edu

    Teacher Elizabeth


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