Should Personal Finance be Taught in School?

Should basic personal financial literacy and skills be taught in school?  It’s an interesting idea and one that I happen to support.  There is a growing movement to implement such classes in school.  A quick Google search will pull up commentary from financial gurus, financial websites, colleges and universities, and parent and teacher groups all promoting the idea of teaching basic financial skills to America’s youth.  So, why the need for such a program, and what makes it a good idea?

Reading, Writing, and Arithmetic

Children are exposed to lessons on mathematics, history, English, and foreign languages.  One could argue the validity of one or more of the things that are taught in our education system.  Some of the lessons are things that will never be applied in most peoples’ lives.  Others are valuable skills.  But what about something that will be essential in life?  Something as important as managing your money.  Earning it, saving and investing it, and staying out of debt.  Most states have no requirement to teach such skills.

Money from Start to Finish

Money is everywhere and will touch everything that a person does.  Whether they go to college or go into the workforce decisions will need to be made concerning taking out loans or budgeting a newly acquired paycheck.  Buying a home, buying cars, saving for retirement, paying utilities, buying groceries, and so on and so on.  Money spans our entire lives from our first job through our retirement years.  It is an intertwined part of our lives like it or not.  We should be treating it as such and teaching how to manage it to our youth.

Thrown out into the World

There are very real consequences to being thrown out into the world without proper knowledge of how to manage money.  Dave Ramsey built a multi-million-dollar empire helping people clean up their financial messes.  Financial problems can lead to stress, depression, divorce, and health problems.  Here are some alarming statistics.

  • Over 38% of households have credit card debt. The average balance?  Just over $16,000 at an interest rate of over 16%
  • Over 30% of Americans have zero saved for retirement
  • Almost half of Americans claim that they could not cover an emergency of $400.
  • Student loan debt is higher than ever. Millennials are entering the workforce with a combined $1.5 trillion in debt from college.

Much of the above could have been avoided had more people been armed with some basic financial knowledge.  How to budget and save.  The importance of an emergency fund.  Not taking out large student loan debt for a degree with little economic viability.

An Ideal Platform

School makes an ideal setting to teach personal finances.  It is a structured environment with trained professional teachers applying well thought out curriculums. Incorporating personal finance seems like a no brainer.  Most aren’t taught this in school, however.  41% of people claim to be self-taught when it comes to money issues.  37% say their parents taught them money matters.

An Argument to Allow Schools Teach our Youth

17 States currently require its students to take a class on personal finance in order to graduate.  This requirement has its roots back in the days of the Great Depression when the poor state of personal finances was evident across much of the country.

Why are schools better equipped to teach personal finance than parents? While over 80% of parents think that they should be teaching money to their children, nearly 2 in 5 admit that their knowledge of finance is limited.  Couple that with the statistics above, and it becomes clear that not all parents are capable of teaching personal finance.  Dave Ramsey likes to say not to take financial advice from broke people.  Not that all teachers may have personal financial savvy, but there would at least be a sound and structured curriculum to follow.

There are valid arguments that there is no room for a personal finance class in school due to time and budget constraints.  But it doesn’t need to be a stand-alone class or even be taught the entirety of the school year.  It could be introduced into existing classes.  Mathematics classes would be the obvious starting point.  And, it could be limited to one semester or some other short time frame.

Personal finance can be complex, but if schools stick to the basics students could self-teach the rest.  Basics such as spending less than you earn, creating a budget, and balancing a check book could be covered.  More advanced concepts like IRA’s, Life Insurance, and Wills and Trusts could be left out.  Once a student has a grasp on the basics, they would be more inclined to keep learning on their own as they enter their adult lives.

Final Thoughts

There is growing support for teaching basic personal finance in school.  It can be argued to what extent so far as actual curriculum and to the length of the classes, but students at a bare minimum need some basic exposure to personal finance concepts and principals.

America is a nation facing a growing crisis with personal money management.  Debt levels are higher than ever, saving rates are low, and financial knowledge is lacking.  With more and better exposure to some basic personal financial principals it may help people to budget and save better, not be so willing to take on debt, and generally live happier and less stressful lives.  What are your thoughts on this matter?  Share in the comments below.

See Also:

Teaching Your Teenager About Credit Cards

How to Get Control of your Finances in 3 Simple Steps

Taking Back Your Finances: 7 Tips on How to Save Money and Pay Off Debt

Bad Spending Habits…And How To Fix Them [Infographic]

Comments

  1. George Guild says

    I could not agree with you more both in terms of the need for financial education basics to be taught in k-12 schools where the majority of students attend and profit from the structured classroom setting.
    In Massachusetts we have finally passed legislation that is a step in the right direction as Chapter 438 was amended to include the teaching of financial literacy in the schools and the Department of Education has adopted the National Financial Literacy Standards to guide the teaching of personal finance at the high school level in either a stand alone course or imbedded in other courses such as math, business, technology, family consumer science etc. The MA law provided guidance for school districts regarding the teaching and learning of personal finance literacy education but requires the Department of Education to provide the school districts with access to quality professional development and quality financial literacy resources.
    Seems that when schools evaluate what a student should know and be able to do when they graduate from high school that they should be including basic personal finance and financial literacy topics like budgeting, saving, credit, investing and insurance.

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