Is School-Based Financial Education Worth the Effort?

September 22, 2021

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Educators and advocates across the country are working tirelessly to increase the number of states that mandate a financial education course to graduate from high school. This work is not for the faint of heart. It requires rallying school boards and administrators, teachers, students, parents, and community groups; demonstrating the importance of financial education; and working with policymakers to develop and pass legislation that positively impacts students. Before putting in this massive effort, it’s important to ask: Why bother? Is school-based financial education really that important? There are other ways to learn about money. Would watching a video series or using an app on your own have the same impact?

State-level mandates are critical to creating better outcomes for students.

Students’ lives are significantly impacted by state mandates in various ways:

  • —Several different studies have compared students from states with financial education requirements to peers from states with no such requirements, 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 out of 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).

One important theme in these research studies is that students must actually take a financial literacy course in order for these benefits to be seen. One of the studies above found that elective courses do not appear to have the same positive effect as mandated courses. A different research study examining knowledge of personal finance found that students in states that required specific financial education coursework scored significantly higher than students in states with either a general mandate or no mandate. In other words, simply adopting standards or paying lip service to the importance of financial education is not enough; students need to actually take a course to gain the necessary knowledge to change attitudes and behaviors.

Graduation requirements make financial education accessible to all students.

If financial education is offered in an after school program or a one-off quick event, it excludes many students, particularly those students who work after school or on weekends. If it’s only required to be offered, like an elective or seminar class, not all students will have access, due to time and availability constraints or students not realizing its importance.

However, when financial education is mandated as a high school course, all students receive access and must take the course to graduate. A semester class ensures 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. A focused course, rather than supplemental information used in various other courses, will provide better and more equitable experiences and outcomes for students. Ultimately, it is a more consistent and cohesive approach to financial education.

The classroom makes a difference.

Apps, videos, self-directed financial literacy platforms, after school programs, and electives only reach some students. The content and quality of these opportunities vary and some have unintended consequences. For example, many of the latest tech tools collect personal information without providing the user a clear understanding of what data is being collected, how it will be used, and how long the information will be stored.

When students learn financial information on their own, the burden is on them to find, vet, and identify content that is relevant and accurate. The risk of misinformation is high, because there is no quality control. Schools and teachers play an important role in filtering materials that lack accuracy or complete information. It’s not a perfect system yet, but schools are getting more adept at vetting materials.

Furthermore, the classroom provides students with multiple opportunities for contextualized practice and reflection, including the opportunity to discuss their experiences, share what they learned, and hear different perspectives and creative ideas from their peers. This-on-the-ground engagement with peers and teachers helps students connect what they’ve learned to real life and build positive knowledge, competencies, and attitudes in personal finance.

The answer is a resounding YES!

Passing state legislation to mandate financial education in schools leads to positive student outcomes. It’s worth the effort. But this work isn't glamorous or easy. It's a long process with many considerations for implementation. Thank you to the teachers, parents, advocates, community organizers, district and state leaders, and high school students working together to make financial education accessible to more students. We applaud and support your efforts to move financial education forward.

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