Studies have long shown that high school students are woefully uninformed about personal finance and how to manage it. But the COVID-19 pandemic, which has revealed how many American adults live on the fringes of finance, has reinforced ongoing efforts to make financial literacy classes compulsory. Seven states now require a standalone financial education course as a graduate degree requirement, and five additional states will have requirements coming into force in the next year or two. About 25 require at least some financial training, sometimes as part of an existing course. This year, about 20 other states have considered establishing or expanding similar rules.
Opponents of the state mandates say the requirements, while commendable, can interfere with the limited time available for other high school electives and would place costly demands on teacher training or hiring. Nevertheless, the financial literacy courses prevail.
“I think there is a lot of momentum now; Many more states have legislation in the works,” said Carly Urban, an economics professor at Montana State University who majored in finance literacy. In seven states — Alabama, Iowa, Missouri, Mississippi, Tennessee, Utah and Virginia — “almost every school requires it,” she said, though some graduation requirements won’t go into effect until 2023.
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In recent years, Nebraska, Ohio, Rhode Island, and most recently Florida have enacted legislation making financial literacy a must-have for high schools over the next year or two. In North Carolina, the degree requirements will go into effect in 2023.
According to the National Conference of State Legislatures, 34 states and the District of Columbia introduced financial literacy bills in the 2021-22 legislative session. Of these, about 20 are concentrated in high schools.
Bills in Kentucky and the District of Columbia appear to allow student athletes to now earn money for use of their name, likeness or likeness. None of the measures require high schools to provide financial education. But the Kentucky law the governor signed into law requires colleges to set up financial literacy workshops for student-athletes. The DC bill would encourage colleges with student-athletes to teach financial education.
Last month, Republican Florida Gov. Ron DeSantis signed a bill into law that would require students entering high school in the 2023-24 school year to complete a financial literacy course as a graduation requirement. The new law provides a half-credit course in personal money management, including how to set up and use a bank account, the importance of credit and credit scores, types of savings and investments, and how to get a loan.
In a signing ceremony, DeSantis touted the law as something that “will help improve students’ financial management skills when they land in the real world.”
Financial literacy is an issue that is remarkably bipartisan. Rhode Island Governor Dan McKee, a Democrat, sounded a lot like DeSantis when he signed Rhode Island’s requirement for financial literacy in high schools last year.
“Financial literacy is key to a young person’s future success,” said McKee. “This law paves the way for our public high schools to equip young people with the skills they need to meet their financial goals.”
Montana State’s Urban said that state policies requiring standalone financial education courses help students the most, especially when states set standards for the subjects that must be included in the curriculum. Most courses last half a year.
Some states are using materials provided by the nonprofit organization Next Gen Personal Finance — which offers a free study guide and educational materials for teaching financial literacy — to help set standards, while others have expanded the units already available in economics , math or social studies courses are included.
Next Gen’s free courses include teacher tutorials and instructional guides on topics such as credit management, opening checking and savings accounts, budgeting, paying for college, investing, paying taxes, and developing consumer skills.
In a 2018 study, according to the Financial Industry Regulatory Authority’s Investor Education Foundation, only a third of adults could answer at least four out of five financial literacy questions on concepts such as mortgages, interest rates, inflation and risk. Financial literacy was lower among people of color and younger people.
According to the Organization for Economic Co-operation and Development, about 16% of 15-year-old US students surveyed in 2018 did not reach baseline financial literacy.
But with some education, these numbers can improve, according to Urban’s studies.
“The results are amazing,” she said in a phone interview. “Credit ratings are rising and default rates are falling. When you borrow a student loan, you go from high to low interest rates and you don’t accumulate credit card debt and you don’t take out private loans, which are more expensive.” In addition, their research found that young people who took some financial education courses , to avail expensive payday loans less often.
According to John Pelletier, director of the Center for Financial Literacy at Champlain College in Vermont, the COVID-19 pandemic has highlighted how few Americans are prepared for financial emergencies and has given new impetus to financial literacy requirements. “COVID woke people up,” he said in a phone interview.
He cited a 2020 Federal Reserve study that showed many Americans couldn’t raise $2,000 in an emergency, and “It really hit home when people were forced to stop working and collect a paycheck.” If politicians haven’t figured out a way to get people cash, we’re dealing with more than just paying rent; we are dealing with hunger and homelessness.”