In May, a stringent new financial literacy law takes effect in Oklahoma: It will require all high school students to pass a class on personal finance before they can graduate. Banking, taxes, investing, loans, insurance and identity theft, among other subjects, will be part of the curriculum, and the teachers will have to certify that their students comprehend them all.
Given the woefully high levels of financial illiteracy in America, making such a course standard and required in high schools might sound like a fine idea. There’s just one big risk: Those teachers could lead their students astray.
Increasing the depth at which American high schools teach personal finance — going further than simple budgeting, balancing a checkbook, compound interest and the like — opens several cans of worms. How qualified are the teachers? How will school districts fund these new courses? How are they adding these subjects to crowded curriculums?
Classes in budgeting, credit cards, compound interest and other basic personal finance skills can help prepare our children for adulthood. The problem stems from overzealous mandates. Our children — and far too often, our teachers — aren’t in a position to handle more than a cursory examination of financial topics.
The Dangers of Unqualified Teachers Teaching Financial Literacy
School districts need to certify teachers in a specific financial discipline much as they would for a math or history teacher. Or school districts should contract outside professionals.
“Teachers feel unqualified to teach financial literacy,” says Julie Heath, director of the Economics Center and economics professor in at the University of Cincinnati. “Eighty-two percent say they are not prepared to teach these concepts, even as over 90 percent of them think they need to be taught in schools.”
“Schools and districts shouldn’t place any teacher in a position to teach subject matter he or she feels unqualified to teach,” says Heath. “Shrinking budgets mean that teachers often do not get the professional development that would make them more confident to teach financial literacy.”
How well qualified to teach financial literacy, for example, is a teacher with with $50,000 in credit card debt?
“To be a teacher or a leader, you must lead and teach by example. We cannot expect someone who is in disarray with their own finances to be placed in a position of teaching someone, regardless of age, about their finances,” says Michael Minter, managing partner of Mintco Financial in Tampa, Fla. “This may be the ultimate root to a [more] serious problem in our country, the financial literacy [or lack there of] among parents and teachers.”
“I think one of the dangers of teaching financial literacy to American high school students is the legacy of fear that money brings,” says Mindy Crary, certified financial planner and financial planning coach. “Is this just another thing that people want kids to be afraid of because they think it’s better to be paralyzed by fear than make a mistake?”
The Integrated Approach
Some school districts in Oklahoma are embedding personal finance modules into math, science, home economics and other subjects throughout the school year instead of having a dedicated financial literacy or personal finance class. “Financial literacy should be weaved into many subjects throughout all school years,” says Katie Stokes, a certified financial planner and director of financial planning at J.E. Wilson Advisors.
“Like most life skills, learning financial literacy is cumulative,” says Stokes. “You can’t expect a high school student to take a semester-long course in economics and come out financially literate. Literacy is knowledge, but without real-world application, that knowledge is stale and not committed to long-term memory.”
Leverage Financial Planners in the Local Community
Some school districts are outsourcing the expertise from their local communities. Crary recommends having the teacher be a facilitator and coordinator for bringing in experts to teach. “You could have a great class where you bring in parents and community members to discuss the best things they ever learned about money and have the kids start to build their own philosophy based on what resonated with them.”
“The greatest danger in teaching financial literacy to high school students is not allowing financial institutions to lobby for influence on the curriculum,” Michael H. Baker, a certified financial planner with Vertex Capital Advisors in Charlotte, N.C. “Kids need to learn true principles and fundamentals that are not influenced by financial bias and marketing of the large institutions that seek to gain brand loyalty with the younger generations.”
Baker suggests having a financial counselor or coach for a school district serve as a mentor for teachers as they learn the new curriculum. It could be a win-win situation for financial planners in the community who are looking for a new future potential client base and school districts desperate for knowledgeable instructors.
Parents Still Hold the Key to Financial Literacy of Our Children
America must address financial literacy early and often in our children’s lives. Mandating high school courses may not be the answer.
According to a recent survey by H&R Block and its Dollars & Sense financial literacy program, a curriculum for teachers and teens, 75 percent of teenagers say their parents are their most important source of financial information. In fact, 62 percent of survey respondents thought of their parents as good role model for money management, and only 4 percent saw their parents as poor examples of how to handle money.
Right now, just 17 states require high school graduates to take a class on personal finance, reports the Council for Economic Education and its 2014 Survey of the States.
“This leaves the responsibility for teaching crucial financial tasks like balancing a budget or managing credit cards to parents, says Kathy Collins, chief marketing officer for H&R Block. “Many of [parents] feel uncomfortable having these difficult but necessary discussions with their children.”
Financial literacy will continue to take a back seat until it is seen as a legitimate academic discipline, full-time teachers are certified to instruct personal-finance-specific classes, standardized curriculums are created, and semester-long classes are mandated throughout the country.
Americans and politicians far too often see financial literacy simply as a life skill that we add to another classroom subject like home economics. But we should look at it as a standalone subject that our children are missing.
Should school districts mandate that high schools teach personal finance? How can states do a better job teaching this critical life skill?