Why Isn’t Personal Finance Taught in School?

As people become more aware of the far-reaching consequences of financial illiteracy, one question becomes obvious. Why isn’t personal finance taught in school? This is a fair question. As one considers the repercussions of financial ignorance and advantages of knowing about personal finance, this question becomes increasingly important. Perhaps it is less important to point fingers and blame schools for missing this obvious necessity of knowledge, and to focus on moving forward so that schools do begin to teach personal finance. Instead of asking, “Why isn’t personal finance taught in school”, let’s ask, “How do we get schools to teach personal finance.”

Schools Fail by Not Teaching Personal Finance

In light of the growing list of the benefits of a personal finance education, some are left wondering, “Why isn’t personal finance taught in school?” The answer is a general failure of the education system to identify the most relevant skills students should possess. While some point to underfunding as a response to the question of why personal finance isn’t taught in school, the education manages to fund STEM programs with expensive computers and lab equipment, but cannot find room in the budget for  personal finance 101 course.

Infographic of Why Isn’t Personal Finance Taught in School Outcomes

When Schools Teach Personal Finance, Students Win

One team of researchers decided to analyze the efficacy of simulations in producing behavioral change in students. Students who took Junior Achievement’s Finance park, a simulation for middle school students that sees students assume family and income scenarios, were split up into two groups after going through the park the first time. One group underwent financial education training while the other group did not. After 12 weeks, all the students went through the park for a second time. Over half the students in the group that received training were able to successfully construct a budget, a statistically significant amount over the only 1 student who was able to do so before the training (National Bureau of Economic Research). http://www.nber.org/papers/w16271.pdf

Low-income workers attending an employer-sponsored financial education program were 11.5% more likely to participate in 401(k) plans and save more for retirement than peers who elected not to attend the education initiative (National Bureau for Economic Research). http://www.nber.org/papers/w5655.pdf

“I want kids to understand the importance of savings and investing. It’s crucial that people understand the importance of financial literacy, because it’s actually life-saving.” – Mellody Hobson, President of Ariel Investments

Kids Emulate Their Parent’s Personal Financial Habits

A research study analyzing the effects of parents’ values on children found a statistically significant positive association between parent’s savings rates and children’s savings rates (University of Agder). https://home.uia.no/ellenkn/WebleyNyhus2006.pdf

Parents who have three or more types of savings are more likely to have kids who discuss money with them (83% vs. 66%) and less likely to have kids who spend money as soon as they get it (40% vs. 52%) or lie about their spending (34% vs. 43%) (Money Confident Kids). http://www.moneyconfidentkids.com/content/dam/money-confident-kids/PDFs/PKM-Surveys/2017_PKM_Results.pdf

“It’s pretty much how we get anything added to the curriculum. When parents said children needed to be computer literate, the schools started responding. The same thing is true of basic financial literacy.” – Elizabeth Warren, United States Senator

Systems for Why Isn’t Personal Finance Taught in School Proficiencies

Accepted Why Isn’t Personal Finance Taught in School Scenarios

When Personal Finance Isn’t Taught in School, Young Adults Suffer

More than 20% of renters aged 18-24 overspent their income by $100 per month (Time). http://business.time.com

26% of adults admit to not paying their bills on time (National Foundation for Credit Counseling). https://www.nfcc.org/NewsRoom/FinancialLiteracy/files2013/NFCC_NBPCA_2013%20FinancialLiteracy_survey_datasheet

85% claimed they were ‘somewhat’ or ‘very’ unlikely to discuss their amount of credit card debt with strangers, more than the percentage of respondents who would avoid divulging details about their love life (CreditCards.com). https://www.creditcards.com/credit-card-news/poll-credit-card-taboo-subject-2013-1276.php

The average debt of students when they graduated from college rose from $18,550 (in 2004) to $28,950 (in 2014), an increase of 56 percent (Institute for College Access and Success). https://ticas.org/sites/default/files/pub_files/student_debt_and_the_class_of_2014_nr_0.pdf

81% of college educated millennials have at least 1 long standing debt (PwC). https://www.pwc.com/us/en/about-us/corporate-responsibility/assets/pwc-millennials-and-financial-literacy.pdf

“Academic qualifications are important and so is financial education. They’re both important and schools are forgetting one of them.” – Robert Kiyosaki, founder of the Rich Dad Company

Schools Need to Teach Quality Personal Finance Courses

Skeptics of why personal finance is important have conducted a thorough review of the abundant academic literature supporting the case for increased financial literacy within our communities. Financial literacy done correctly has been demonstrated to increase the amount allocated towards retirements savings, reduce stress caused by financial problems, and increase the net worth of learners. Such research enumerating the benefits of financial literacy, taken in aggregate, shifts the burden of proof to the skeptics in proving that teaching personal finance in schools does not work.

New Zealand’s Commission for Financial Literacy and Retirement Income encourages initiatives to share knowledge and research with other programs and to systematically evaluate the program’s effectiveness (Commission for Financial Capability). https://www.cffc.org.nz

The World Bank recommends leveraging social networks, identifying an underserved target population, and presenting the material in a novel and engaging way (WorldBank.org) http://worldbank.org

Policy Makers Are First Step in Getting Personal Finance Courses in School

Why isn’t personal finance taught in school and why don’t all students have access to personal finance coaches before they take out student loans? The answer is a mix of inertia in the system and a failure to recognize financial literacy as one of the core skills needed to succeed in the 21st century. Rather than simply asking, “Why isn’t personal finance taught in school,” concerned individuals can partner with financial education providers to bring the discussion to policy makers and force them to confront the question. Only with sustained efforts can strides be made towards a smarter education system that includes personal finance education.