Introduction
The American Civil War, the nervous system, or John Steinbeck’s writings? Absolutely. But credit ratings and substance abuse prevention? These topics have traditionally been absent from the standard high school curriculum.
Shift Towards Financial Education
However, this is rapidly changing. According to a recent study by Champlain College’s Center for Financial Literacy, financial education for young people is becoming increasingly common. By 2028, 24 states will require high school students to complete a standalone personal finance course to graduate, a significant increase from the current seven states.
Impact on Students
This change means that more than 40% of U.S. high school students will receive formal financial education. John Pelletier, the center’s director, attributes this surge to the economic turmoil caused by recent crises, which highlighted the financial vulnerabilities of many Americans. As state lawmakers received personal stories and concerns from their constituents, they were compelled to act.
Bipartisan Support
Interestingly, the push for financial education has transcended political divides. While debates over topics like gender identity and slavery education have polarized many states, financial literacy mandates have garnered widespread bipartisan support. In states like Florida, these new requirements were passed with overwhelming legislative backing.
The Need for Financial Literacy
Research underscores the urgent need for financial literacy. A survey by George Washington University and the TIAA Institute revealed that those who lack financial knowledge are more likely to incur debt, live paycheck to paycheck, and fall prey to predatory lenders. By January 2023, 30% of American adults reported struggling to make ends meet, up from 24% the previous year.
Benefits of Financial Education
Studies by Carly Urban, an economics professor at Montana State University, show that mandatory financial education leads to higher credit scores, lower crime rates, and improved student loan repayment rates among lower-income and first-generation college students. These courses aim to equip students with the skills needed to make informed financial decisions, from saving and investing to managing debt and budgeting.
Addressing Educational Gaps
Despite the importance of financial education, many high school economics classes do not adequately cover personal finance. Furthermore, parents often avoid discussing household finances with their children. According to the National Endowment for Financial Education, 80% of people polled in March 2022 believed that a personal finance course should be a high school requirement.
Ensuring Equal Access
Without statewide mandates, Hispanic, Black, and lower-income students are less likely to have access to financial education. Next Gen Personal Finance found that local district requirements are insufficient to ensure widespread access. The organization advocates for mandatory financial education in all states by 2030.
Essential Financial Lessons
Credit scores and compound interest are crucial topics for young people, says Pelletier. Building a strong credit history and making timely payments can save individuals up to $300,000 in interest over their lifetime. Additionally, early investments, such as a $10,000 gift invested at age 18, can grow to $320,000 by age 68, thanks to compound interest.
Expanding Financial Education
Champlain College’s Center for Financial Literacy tracks the progress of financial education mandates across all 50 states and Washington, D.C. The center sees growing momentum as a positive sign of increasing recognition of financial education’s importance and assists teachers nationwide in developing personal finance curricula.
Historical Context and Future Growth
No state required a personal finance course for high school graduation as recently as 2007. Utah was the first to mandate such a course during the Great Recession for the class of 2008. States like Florida, Ohio, Connecticut, and others are set to follow suit by 2028, with Wisconsin being the most recent addition.
Conclusion
The movement towards mandatory financial education is gaining traction, and more states are likely to adopt similar requirements to avoid falling behind. This shift reflects a growing understanding of the critical role financial literacy plays in preparing students for successful futures.