Spending Smarter: The Spread of K–12 Financial Literacy Programs
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By Kathryn Lakin
Summer 2023 Intern
We all know the old rule about small talk: never bring up politics, religion, or money. For young people learning how to manage money, this last point can become a problem. According to a nationwide survey , 83% of U.S. adults said parents are responsible for educating their children about money, but 31% of parents surveyed said they had never discussed money with their children. In today's society, the number of financial decisions an individual makes continues to increase, yet there is a lack of communication about money matters between parents and children.
The impact of this financial illiteracy on individuals and the economy is significant. A survey conducted by the National Financial Educators Council in 2022 estimated that financial illiteracy cost U.S. citizens an average of $1,819 per person. Using this average, the council estimated that financial illiteracy cost the United States more than $436 billion in 2022 alone.[1] This financial illiteracy is especially concerning when you consider the fact that about 40% of adults under age 30 have student loan debt, and a lack of financial education may lead them to take out predatory loans.
Recognizing the importance of financial literacy, the U.S. Treasury Department established the Financial Literacy and Education Commission , tasked with developing a national financial education website, in 2003. In the past 20 years, 22 states have implemented financial education graduation requirements, a move that demonstrates growing awareness of the importance of financial education in schools. The programs have been a marked success, and a study from Champlain College found that mandating personal finance education in high school led to improved credit scores and reduced default rates among young adults. By introducing financial concepts early in K–12 education, students can develop essential skills such as counting money, creating budgets and understanding the importance of saving.[2]
Despite these efforts, only 1 in 10 high school students take a personal finance course before graduation outside of these “guarantee” states.[3] Furthermore, the discrepancy in personal finance course enrollment between different school environments is evident. For example, in schools with a high percentage of Black and Hispanic students, only 7% of students enroll in finance courses, compared to 14% of students in schools where Black and Hispanic students make up less than 25% of the student body.[4]
Requiring financial literacy courses in schools has clear benefits, and a substantial 88% of adults surveyed in 2022 expressed support for mandating either a semester- or year-long personal finance course in all schools. These survey participants recognize that financial literacy education in K–12 is of paramount importance. By providing students with the knowledge and skills to make sound financial decisions, we can empower the next generation to lead financially secure lives and contribute to a stronger economy.
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The first state to introduce a personal finance graduation requirement in public high schools was Utah, the Beehive State!