The State of Financial Literacy Education

More states are requiring that high school students have at least one class geared toward financial literacy. The term “financial literacy” broadly encompasses knowledge of personal finance (saving, budgeting, and investing), and/or economics, including such topics as crypto currency, monetary policy, taxes, and interest rates.

According to the Council for Economic Education’s (CEE) 2024 Survey of the States (updated every two years), seventy percent of states — 35 in total— require that graduating students take a personal finance class, vs. just 23 states in 2022. Twenty-eight states now require students to take an economics class to graduate, compared to 25 states in 2022. And 25 states demand that students have a class in each. Some cities and states are requiring that financial education start even sooner, in grades six to eight.

These new requirements mean that in 2028, 41% of high school students will be required to take a class in personal finance, the CEE estimates.

COULD HAVE, WOULD HAVE, SHOULD HAVE

There are several reasons for the push for new requirements around financial literacy. Nonprofits such as the CEE and Next Gen Personal Finance (NGPF) have increased advocacy efforts, more people are recognizing the need, adults and students alike are clamoring for such courses, and there is evidence that education pays off.

A 2022 poll from the National Endowment for Financial Education (NEFE) found that eighty-eight percent of survey respondents believed that their state should require that high school graduates have either a semester- or year-long financial education course. Eighty percent said that they wished that they had been required to take such a course.

“Americans overwhelmingly recognize the importance of learning money skills at an early age and this poll reinforces there is demonstrated national support for personal finance to be a part of learning in all schools,” said Dr. Bill Hensley, president and CEO of NEFE.

Results were similar when high school students were surveyed. An Intuit Financial Education survey released in April 2024 showed that eighty-five percent of U.S. high school students said that they were interested in learning about financial topics in school, while ninety-five of students who were actually taking financial literacy courses reported them as helpful.  

HIGH STAKES, HIGH COST

Indeed, the utility of financial literacy often becomes apparent when people need  to make informed decisions that can have major consequences: whether to pursue higher education or enter the workforce, how to finance education or vocational training, and how best to save, spend, and invest money. Unfortunately, the fact that people are often ill-equipped to make good financial choices also becomes apparent. Financial literacy among adults in the United States is around fifty percent, according to a 2024 report from the World Economic Forum. That figure is virtually the same as it was in 2014, according to a  survey by Standard & Poor’s.

Lack of knowledge can be costly. According to NGPF’s annual report, “Financial illiteracy can have a profound effect on a person’s ability to save for their future, increasing their risk of higher debts and less savings. People who are financially literate make smarter decisions about saving, planning for retirement, investments, and more.”

The National Financial Educators’ Council (NFEC) put an actual dollar figure on financial illiteracy. In 2023, it conducted a one-question survey, asking adults in the U.S.,“During the past year (2023), about how much money do you think you lost because you lacked knowledge about personal finances?” The average estimated amount was $1506.

Other costs aren’t as easily calculated but are still great, believes John Pelletier, Director, Center for Financial Literacy. “We would not allow a young person to get in the driver’s seat of a car without requiring driver’s education, and yet we allow our youth to enter the complex financial world without any related education,” he says. “An uneducated individual armed with a credit card, a student loan and access to a mortgage can be nearly as dangerous to themselves and their community as a person with no training behind the wheel of a car.”

GOOD INVESTMENT

And the solution favored by both adults and students has been proven to be an effective one. Research from the Champlain College for Financial Literacy found that financial instruction in high school, ““[O]verwhelmingly” improves credit scores, lowers loan delinquency rates and reduces the use of risky services like payday lending. It also leads more students to low-interest college financing and away from high-interest loans, and increases repayment rates for first-generation students and those from low-income families.””

While the benefits of secondary school education are numerous, as outlined above, no impact on retirement savings has been shown. Speculated one researcher, Dr. Carly Urban, “Young people may be fixated on ‘right now,’” with retirement too abstract or remote to command action. The recommendation is for classes to focus on aspects of financial literacy of immediate use to teens: budgeting, long-term debt and credit.

Regardless of each state’s specific requirements, it is clear that the momentum around equipping students with the knowledge needed to navigate their financial futures makes sense, and the investment will be a sound one.