Equitable Access to Financial Education

September 16, 2021

Rationing refers to the allocation of scarce resources—resources in high demand and low supply. We often think of rationing in terms of food or medicine and more recently in terms of paper products and disinfectant sprays. Ideally, rationing is done to ensure a fair distribution to all. In dire circumstances, supplies and/or support are withheld from some individuals while given to others. The moral considerations of this are immense.

Rationing typically references the allocation of resources; however, do you think it is possible to ration information? Can you imagine a circumstance in which information in high demand would be a resource given to some and withheld from others? This, unfortunately, is the reality of the financial education landscape in the United States today.

Access to financial education depends on where you live

There are areas and populations across our country without access to quality financial education. The disparity between those with access to information and those without is great. According to a recent survey (Council for Economic Education, 2020):

• —45 states include financial literacy in their K–12 standards. Five states (and the District of Columbia) are without standards.
• —Seven states require a stand-alone high school financial literacy course and an additional 15 states require coursework to be integrated into another course. That leaves 29 states (and the District of Columbia) without any requirement that students take a course that includes financial literacy content.
• —26 states (and the District of Columbia) do not even require that a high school personal finance course be offered to its students.

Financial education is in high demand

Clearly, financial education is being withheld to students based on where they live. But in terms of rationing, is there also high demand for this information? Yes, because financial education has demonstrable impacts on students and their decisions about money. Consider the following:

• —A research study conducted by Carly Urban and Christiana Stoddard at Montana State University found that students who were required to take a high school financial literacy class made better decisions related to financial aid as college freshmen (National Endowment for Financial Education, 2019).
• —Several different studies have compared students from states with financial education requirements to peers from states with no such requirement, and have found that those students who completed a financial education class have higher credit scores and lower rates of delinquency on open accounts (Brown et al., 2014; Urban et al., 2016).
• —A study by Melody Harvey at the University of Wisconsin–Madison found that state financial education mandates were associated with a decreased likelihood of costly payday loan borrowing (Harvey, 2019).
• —Yet another study examined financial behaviors and dispositions of college students and found that those who had completed a required financial literacy class in high school were more likely to save, less likely to max out their credit cards, less likely to miss credit card payments, and more likely to pay off their credit card bills in full each month (Gutter et al., 2010).

The above studies lay out some persuasive short-term effects of financial education, but there are studies that detail important long-term effects as well.

• —Research by Jamie Wagner and William Walstad found that financial education appears to have positive and strong effects on long-term behaviors such as having an emergency fund, a savings account, financial investments, and an understanding of how much money is needed for retirement (Wagner & Walstad, 2010).
• —A different study found that financial education increases the rates at which individuals save and accumulate wealth during their adult lives (Bernheim et al., 2001).

So, why ration or deny access to a high-demand resource that is demonstrably beneficial in the short and long terms? Is it fair that some high school students have the benefit of living in a state with a mandated personal finance course while others reside in a place without any financial literacy standards? What can be done to level the playing field?

Action steps to ensure all students have access to financial education

We believe that there are three initial steps that education leaders and elected officials in every state can take to begin to address the inequities in access to financial education.

• 1) Ensure your state has adopted high-quality financial literacy standards. When a state adopts a set of standards, it sends a message about the content in those standards. The message is that the content is important—that it is worthwhile to teach, learn, and assess. However, not all standards are equal. Even in states with existing standards, leaders should take another look at the standards with a discerning eye. Do the standards speak to critical thinking and decision-making skills with regards to financial topics? Or are they simply a laundry list of financial facts and procedures for students to learn and follow? Do the standards take into account the broad experiences and unique environments that students bring to school? Or do they assume that every person needs exactly the same information to succeed financially? High-quality financial literacy standards should be written to prepare students for the real-world financial decisions that they will be making as adults, and with equity in mind.
• 2) Advocate for every high school in your state to offer a financial literacy course that addresses your state’s standards. Standards are an important first step, but standards themselves do not ensure that students will learn the content contained within those standards. It may seem self-explanatory, but the best way for students to learn is for them to be taught. A course will ensure that the concepts and skills found in the standards are part of the core content taught to students, with clear expectations via course materials about what students will learn and how they will be graded. We emphasize here that financial literacy content should not be folded into some other course like business or mathematics. Doing so demotes financial literacy topics as secondary to other subject matter, and it also creates issues of equity. What if, for example, a student is not on the math track that would give them access to the math course that includes financial literacy? A focused course rather than supplemental information used in a various other courses will provide a better and more equitable experience and outcomes for students
• 3) Insist that financial literacy coursework be a high school graduation requirement. If equity in financial education is important, then financial literacy coursework must be a requirement for all high school students. An elective course allows the status quo to continue: some students will have access to financial literacy knowledge, some students will not, and true change for all students will not happen. In addition, establishing financial literacy as a high school graduation requirement will increase its value and legitimize it as an academic pursuit. What other courses are required for graduation? Certain mathematics, literature, science, and history classes are fairly typical requirements. Why these subjects? Because our society has deemed them as subjects that contain essential knowledge for adult citizens of our country. In this day and age, financial literacy is essential to being a productive and successful member of our society. It’s time for educators and policy makers to recognize and formalize this fact by making financial literacy a graduation requirement.

It's time

Financial education holds promise. It can improve short-term outcomes for young adults, beginning their independent financial lives. It can improve longer-term outcomes for adults, impacting their financial health. But these promises cannot be attained if students are not given opportunities. It’s time to acknowledge the importance of financial education and ensure ALL students—no matter where in the country they go to high school—are given the opportunity to reap its benefits.

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