These States Now Require Students To Learn About Personal Finance
Americans struggle with financial literacy, and it’s rooted in how they’re exposed to money from childhood on.
A widely cited study by Standard and Poor’s in 2016 found that only 57% of adults in the United States are financially literate, meaning they understand three out of four fundamental concepts for financial decision-making.
Now, states are stepping in to require students to learn more about personal finance at school.
Florida, Nebraska, Ohio and Rhode Island have all recently passed laws making personal finance courses a graduation requirement for high schoolers. The push comes after the coronavirus pandemic wreaked havoc on the American economy and flipped the financial well-being of many Americans upside down.
“The pandemic brought to light how important managing your money is because so many had to cut back or lost their jobs,” says Leigh Singleton, director of Monifi Bank MoneyMoments, a consumer financial education program. “It’s an important topic to teach our kids.”
Only 7 U.S. States Require Students to Learn About Personal Finance
Alabama, Mississippi, Missouri, North Carolina, Tennessee, Utah and Virginia require high school students to take at least one semester of a personal finance course before graduation; one is currently implementing the requirement (Iowa); and four (Florida, Nebraska, Ohio and Rhode Island) are preparing to implement it in the near future.
Florida is the most recent—and largest—state to make personal finance classes a graduation requirement. Starting in the 2023-2024 school year, students entering high school will be required to take a half-credit personal finance course before they graduate.
The course will teach students money management essentials including how to open and manage a bank account, basic principles of money management and how to complete a loan application.
But while only seven states mandate personal finance classes as a graduating requirement,
standalone personal finance classes are becoming the norm in schools across the country. As of March 18, there are 43 bills in 21 states to mandate that schools teach financial literacy as their own courses, according to the NextGen Personal Finance’s 2022 FinEd BillTracker.
Though these new mandates are garnering attention, teaching personal finance in school isn’t a new concept. Most states have laws that recommend including personal finance into high school curricula—but most are taught as supplementary material in other courses, such as an economics class. Experts are critical of this approach.
“If personal finance is not guaranteed as a standalone course, unfortunately, it doesn’t always get taught because of overcrowding in curriculum,” says Christian Sherrill, director of partnerships and advocacy at Next Gen Personal Finance, a nonprofit that advocates for teaching personal finance in schools.
Singleton adds that in standalone courses, teachers are able to dive deep into topics and let kids use hands-on methods of learning to fully grasp financial concepts—two things that might not be possible when squeezing it in with another course.
But not everyone agrees that the mandated standalone classes go far enough in being effective for students because personal finance and money management is complex and multi-faceted—it can’t be absorbed overnight. Vince Shorb, CEO of the National Financial Educators Council, states that a semester-long course just doesn’t cut it for students.
“Imagine trying to speak another language or learn any subject after only 10 hours to one semester,” says Shorb.
Is Financial Literacy in High Schools a Catch-All Solution?
While teaching children the basics of budgeting and investing seems like an obviously good idea, there are dissenting voices that claim it’s a bandaid over a larger wound in American society.
Helaine Olen, an opinion writer for The Washington Post, argues that systemic inequality, from the gender wage gap to racism, accounts for most of the financial strain Americans feel. Claiming that people would be more financially sound if they’re taught financial literacy won’t change the systemic entrapment they face from inequality, Olen says. Some academics share similar sentiments.
Singleton says everyone should know the basic principles of managing money, even while acknowledging there are systemic issues beyond our control.
“We’ve got to be able to manage our money regardless of external forces,” says Singleton. “Having better external forces is not going to help us budget our money better. We’ve got to have that basic concept.”
How Parents Can Teach Kids About Personal Finance
While schools are starting to implement financial education, experts advise that parents don’t solely rely on these classes for their kids to learn how to be financially literate. Building a strong financial foundation, says Singleton, starts at home.
“As parents, we’re their biggest influence when it’s come to money and they need to see us as parents practicing money concepts in real-life situations,” Singleton says. Past research shows that children do in fact learn more about finances from their parents than any other source.
If you’re stumped with figuring out how to teach your kids about money, consider these three steps.
1. Talk About the Basics
Money can often be regarded as a taboo subject, making some families hesitant to discuss it openly or at all. But research shows that during childhood, we build the foundations for financial well-being later in life—which makes opening up the discussion even more important. According to the Consumer Financial Protection Bureau (CFPB), discussions around money basics can start as soon as a child is three years old.
If you’re not sure where to start, CFPB’s Money as You Grow resource provides parents and caregivers with different financial topics to discuss with children, such as paying with a credit card or the steps taken to purchase a new vehicle. It also provides guidance on how parents can adjust financial conversations for every stage of life, from young childhood to early adulthood.
Financial topics to consider discussing with children include earning, saving, planning, borrowing and insurance with your children.
2. Let Them Practice
After teaching children basic concepts of money, allowing them to live out those concepts through practice can help them retain the information—and give them an opportunity to make mistakes that they can learn from. The CFPB says children as young as six years old can start using hands-on experience with money.
One example of learning by doing would be through giving children their own money. The Financial Industry Regulatory Authority suggests giving children a regular allowance—even if it’s a small one—can help them learn how to budget their cash. Encouraging them to make it last until their next allowance day teaches them the principles of making wise spending choices and allocating their funds accordingly.
There are also financial apps geared toward kids, like FamZoo and Greenlight, that come with prepaid debit cards and the capability to invest, track spending and more. Some of these apps require monthly subscriptions. Practicing with these tools is best suited for teens and young adults.
3. Set a Good Example
Kids look up to their parents for guidance on how to navigate and think about things—especially money. Setting a good example means showing children how to approach difficult money situations and keeping them in a positive light.
Singleton gives the example of shopping with a child and the parent seeing a new pair of shoes they might want. At the same time, the parent knows they’re saving for a summer vacation—so they choose not to buy the new shoes, since saving for the vacation is more important to them financially.
Singleton says the parent should use this as an opportunity to discuss why they won’t be purchasing the new shoes and what the money will be used for instead.
“We should talk to our kids about our money choices and sacrifices,” Singleton says. “And it’s important to be positive about them.”
Read more: How To Teach Your Kids Good Money Habits
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