Our education system is failing our children. It’s not because of the usual suspects that we know all too well – a lack of quality teachers, STEM education or public education financing. The system is failing our children because it is not educating and equipping tomorrow’s leaders with an essential life skill - financial literacy.
In 2015, approximately 3 million students graduated from high school in the U.S. These students were educated and tested on topics that many of them will never employ after receipt of their high school diploma. What they were not taught is a subject matter that they will undoubtedly be forced to encounter in their lifetimes, despite their level of mastery, financial literacy (or personal money management). Many of these students will make catastrophic financial decisions simply because they will not know any better. Period.
So, who is to blame for the lack of financial literacy among our nation’s youth? The main culprits are our policy makers. The U.S. released its initial National Strategy for Financial Literacy in 2006 and a revised version in 2011 following the financial crisis of 2009. However, curricula components and implementation are relegated to the state level and the outcome thus far has been, frankly, dismal. Only 17 out of 50 states have personal finance education as a component of high school curricula and only six states require students to demonstrate satisfactory knowledge of personal finance to graduate. States like New York, California, and Florida are noticeably absent from these lists.
The secondary culprits are parents and guardians. A child’s first encounter with financial education is in the home. If parents do not exhibit, practice, and live sound money management then it is almost guaranteed that children will not as well. According to a 2016 Parents, Kids & Money Survey conducted by T. Rowe Price parents are missing the mark and not serving as the educators they need to be. 71% of parents surveyed said they are reluctant to discuss the family finances with their kids. While 72% of parents do not have sufficient emergency funds to cover at least three months' worth of living expenses.
How Much Do Our Teens Know About Finance?
Let’s look at some statistics to see how our children stack up to their peers. According to a recent, global financial literacy test administered to high school students by the Organization of Economic Cooperation & Development, U.S. students are shamefully behind their global peers:
- U.S. teens scored an average of 492 vs. 602 for China
- 17.8% of U.S. students scored in bottom quartile vs. 15.3% global average
- 9.4% of U.S. students scored in the top quartile vs. 19.3% for New Zealand
- 18% of U.S. teens scored below the baseline financial literacy level vs. 2% for China
Per a 2014 CNBC.com report, a key commonality among countries whose teens scored better than U.S teens on financial literacy test is a national mandate for the inclusion of financial literacy in education curricula. Countries like Australia, United Kingdom, and New Zealand have developed national financial literacy strategies with mandated education components in their school systems.
It should be noted that teens from the U.S. participate less in the banking sector as compared to countries in which financial literacy is mandated and taught in school. Over 80% of students in New Zealand and Australia own bank accounts, respectively. This is compared to about 50% for U.S. teens. Children become better adept at managing their finances when they can turn lessons into real world transactions.
As a result of policy maker’s inability to do what’s right for our children, nonprofit organizations and private entities have moved to the front lines of the fight against financial illiteracy. Key figures and entities such as Ted Gonder of Moneythink, Sabrina Lamb of WorldofMoney, and my own organization, D.R.E.A.M. have made an impact in providing financial literacy education to our youth. However, these organizations on their own are unable to address the desire situation that negligent U.S. policy makers have created.
How You Can Get Involved
You can help shape financial education policy in our nation’s school system by engaging with your Chief State School Officer and requesting that financial literacy education be mandated in your state’s high school curricula. Write a letter to your local state board of education official and demand that financial literacy education be mandated and implemented.
As stated before, under current federal law, individual states and school districts are tasked with the creation and implementation financial literacy education. So you can make a difference by getting involved. Our children need us.
In the U.S., April is recognized as National Financial Literacy Month. As we initiate our celebration of financial education this month, we thought it would be prudent to examine the state of financial literacy today. What is the state of your personal finances? We highly encourage all our readers to utilize this month to conduct a personal financial check up. Also, you are encouraged to attend local events as many organizations host events for NFLM to increase financial awareness in the community. Lastly, take some time this month to speak with a young person about sound money management. The next generation needs to hear from you.
About the Author: Femi Faoye is the Co-Founder and Chief Executive Officer of D.R.E.A.M. He’s a staunch and passionate financial literacy education advocate. You can follow his insights on twitter @Femi_Faoye.
Notwithstanding any language to the contrary, the views expressed in this post reflect those of the author and are solely theirs and do not reflect the views of Developing Responsible Economically Advanced Model-Citizens, Incorporated or any affiliates. Opinions are based upon information the author deems reliable but Developing Responsible Economically Advanced Model-Citizens, Incorporated does not warrant its completeness or accuracy and should not be relied upon as such. Neither the author nor Developing Responsible Economically Advanced Model-Citizens, Incorporated guarantees any specific outcome or profit from recommendations presented and you should be aware that losses may occur following any strategy or investment discussed. This material does not take into account your particular investment objectives, financial situation or needs. Before acting on information in this post you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
The contents of this post cannot be redistributed without the explicit written consent of the author and Developing Responsible Economically Advanced Model-Citizens, Inc. All images in this post owned by Developing Responsible Economically Advanced Model-Citizens, Inc. may not be used in any advertising, publicity, or otherwise to indicate members' sponsorship or affiliation with any product or service without the prior express written consent of Developing Responsible Economically Advanced Model-Citizens, Inc. All other images presented not owned by Developing Responsible Economically Advanced Model-Citizens, Inc. are the property of the author, respective company, or photographer. The rights to the images and likeness represented are under explicit ownership of the person(s) aforementioned.