Personal Finance Education Promotes Smart Decision-Making and Career Aspirations

Speaking with two of my younger colleagues recently, it struck me how parents — or other family members — are often our first financial teachers, for better or worse.?

One colleague described the formative role her parents played in introducing her to savings and budgeting at an early age. They opened a kid’s savings account for her when she was 7, paid her an allowance for household chores and established a few age-appropriate expenses for which she would be responsible, such as an occasional family dinner out or the car payments for her first car.

The other colleague said they learned more about how not to manage their money by observing family members who did not save or adequately budget their income, forcing them to live paycheck to paycheck or delay retirement.

While these stories seem quite different, there is one important similarity: Neither colleague received any formal financial education in school. Such instruction was rare at the time, because only a handful of states required high schools to offer personal finance coursework in the early 2000s.

Although the state of personal finance education has improved since then, the vast majority of U.S. students are still not trained in school on basic finance. About half of the states currently require high schools to offer personal finance instruction to their students. However, that’s not typically a prerequisite for graduation, and many schools simply incorporate some personal finance topics into other coursework. This represents a missed opportunity to both provide our nation’s youth with a solid foundation in financial concepts and to spark a greater interest in financial careers.?

Thankfully, a growing number of states have begun strengthening personal finance education for young people. As of 2020, only six states required high school students to complete a stand-alone personal finance course that was at least one semester long in order to graduate, according to the Council for Economic Education. In the last two years, that number has nearly doubled.

Florida recently became the largest state to implement this requirement. Signed into law at the end of March, Florida’s mandate will apply to students entering high school in the 2023-2024 school year and each academic year thereafter. These students must take a half-credit financial literacy class that teaches them the basics of banking, money management, credit, loans and taxes, among other subjects. (Charlie Fitzgerald III, CFP?, a former member of our Board of Directors, was an active supporter of the bill’s passage.) Iowa, Nebraska, Ohio and Rhode Island recently passed similar requirements, and the nonprofit Next Gen Personal Finance reports that lawmakers in 19 other states are considering dozens of bills to advance school-based financial literacy.

There are numerous benefits to teaching money matters in school, not least of which is helping students make smarter choices that will lead to financial independence. For example, research has shown that students who complete state-mandated personal finance courses are more likely to choose lower-interest college loans and apply for more financial aid. They are also less likely to take on expensive credit card debt.??

Personal finance education can also introduce students to the different types of professionals —including CERTIFIED FINANCIAL PLANNER? professionals — who can help them make sense of and manage their finances in adulthood. It may even inspire them to pursue a financial advisory career.

This last point is a key focus for CFP Board. Through our Center for Financial Planning, we are working to strengthen the financial planning profession’s talent pipeline and cultivate a next-generation workforce that can meet the ever-growing demand for personal financial advice. Getting young people interested in our profession and encouraging them to study financial planning in college is a critical part of that effort — and essential to our profession’s sustainability.

The more students have access to and take advantage of personal finance education, the more likely we are to foster future generations of adults who are equipped to make sound financial decisions and motivated to help their peers achieve their financial goals. That’s the kind of future that benefits us all.