Teaching financial literacy to students can be challenging because it is a complex topic that requires not just a basic understanding of math principles, but also other related skills like problem-solving and goal-setting. Even with the proper knowledge, it can be challenging for a teenage brain to grasp how to balance a budget or plan for retirement. However, students need to learn financial literacy in order to make smart money-based decisions. Unfortunately, only 17% of American high school students are required to take a personal finance course in high school, and younger students often receive nothing at all.
This trend can widen long-standing financial gaps in our society. Research shows that lower financial literacy rates cost the U.S. 415 billion dollars per year. And this trickles down into individual lives. While some of these problems are difficult to resolve due to longstanding inequities beyond one person’s control, we can empower students from underserved communities to regain control of their finances and build independent lives. Read on to learn why teaching financial literacy is important for students, and what we can do to increase their knowledge.
Financial Literacy Increases Opportunities
Young people are targeted frequently with incentives to spend. On average, college students have $3,100 in credit card debt and must manage roughly $37,000 in student loan debt. Factor in predatory lending practices, high-interest credit cards, and other unethical financing practices, and we see that teaching financial literacy is crucial for students’ future success.
Research shows that financial literacy classes can improve student outcomes. Recent financial education initiatives in Georgia, Idaho, and Texas have reduced payday loan usage and crime in young people and increased the amount of assets students hold over time. Consider how life-changing these initiatives can be. By having high credit scores and limited debt, students can gain access to capital that may otherwise be unavailable, such as purchasing a home, car, or business financing. Because much of our financial system is based around gaining assets over time, investing funds early in life can help high school and college students begin their financial journeys on the right foot. Knowing how to engage in the financial world helps prevent students from resorting to delinquency or unethical methods to gain money. Teaching financial literacy may save their lives.
In addition, through exposure, students may gain an interest in financial career paths. Acquiring an understanding of interest rates, loan practices, and budgeting gives students skills for various professions related to finances. They may then choose to pursue opportunities related to business, taxes, law, or entrepreneurship. Financial literacy classes open up a world of possibilities for students.
Why Start Young?
Because many states do offer optional financial literacy classes in high schools, it may not seem like financial literacy education is low in the United States. However, research shows that financial habits begin developing around the age of five. This means that students don’t learn about important monetary habits for at least eight years after they become capable of it. And because most financial literacy courses are only a semester-long, students don’t get the in-depth knowledge of finance that they do with core subjects like reading and math.
Fortunately, it’s not necessary to create an entirely new class for financial literacy for younger grades; rather, it can be intertwined into the current curriculum. For instance, elementary school students can learn about the basics of income and jobs in social studies class, create a simple savings plan in math class, or carry out a research project related to market trends in English class. Middle schoolers and early high schoolers can go more in-depth, learning about interest rates, budgeting, financial planning, and even stocks. The possibilities are endless and can provide a “real-world” stimulus to learn other important skills as well.
You can also teach kids basic budgeting skills to use outside of the classroom. Simple activities, such as calculating the price of snacks on a grocery trip or helping to plan meals during the week, might be a good way to get children involved in learning money management skills. You can also take advantage of fun virtual financial literacy education. PNC’s S is for Savings, for example, includes a visualized budget and educational Sesame Street videos to help elementary schoolers begin to manage real-world money. Middle schoolers can enjoy Misadventures in Money Management, a graphic novel-style game that teaches lessons about debit and credit cards, debt advice, and investing. These programs will give your students a strong foundation for learning advanced financial literacy skills in high school and beyond.
Resolving Disparities in Financial Education
Financial illiteracy is often not evenly distributed among communities. Disparities in financial literacy often occur along racial, income, and gender lines. Research shows that Black and Hispanic/Latino Americans have lower financial literacy rates than their White and Asian-American peers, especially among young people. There is also a ten percent gender gap in financial literacy rates between men and women. Much of this disparity is connected directly to the economic hardships that each group faces. Schools with high percentages of low-income students are much less likely to have access to financial literacy classes, and low-income families are less likely to discuss finances with their children. In addition, low-income communities of color are targeted with predatory lending practices and economic hardships. Low-income and BIPOC students are not only dealing with the same financial struggles as almost everyone else, but they also have a host of other personal, familial, and societal challenges ahead of them.
Families in poverty are at many disadvantages when it comes to learning financial literacy. For example, many Americans in poverty avoid financial discussions with family more than their more well-off peers and don’t discuss key concepts such as savings or retirement with children. Because of the stressors of poverty, it may be difficult for low-income people to invest, save, or otherwise set aside money. And since economically disadvantaged areas don’t often have as much access to financial literacy classes, this gap is further widened. Thankfully, financial education can reduce this gap. Students taking financial literacy classes in high school are likelier to have strong savings accounts and 401Ks. At-risk students can receive further education to spot risky investments and loans, make informed choices that can save them money, and advocate for themselves financially.
Conclusion
Teaching financial literacy is one of the most valuable things we can do for our students. Students with a solid grasp of personal finance and economics can begin investing and saving at young ages, find quality financial opportunities, or even learn about careers in finance. Students must be exposed to financial topics early in their lives to improve their chances of attaining a lifetime of economic stability. Over time, a quality financial literacy curriculum can help underserved students work around targeted, predatory financial practices and build secure, fulfilling lives.
You can support the education of underserved students with Educate. Radiate. Elevate. We are a nonprofit organization that centers around providing no-cost tutoring services to children from low-income backgrounds. Our holistic strategy incorporates learning and life skills into academic lessons to facilitate long-term success. Volunteer, donate, or partner with E.R.E. today!
