Dr. Martin Luther King, Jr. once said, “Education must enable a man to become more efficient, to achieve with increasing facility the legitimate goals of his life.” The function of education, he argued, is vital for the betterment of students’ lives and society as a whole.
As we continue to focus on the need for personal finance education, specifically as April marks Financial Literacy Month, it’s important to recognize its role in forming a well-rounded student. Because teens who lack a basic understanding of personal finance will grow into adults who are not equipped with the tools to lead financially stable lives.
A 2012 study of nearly 30,000 teenagers from 18 countries found more than 1 in 6 students in the United States failed to reach the baseline level of proficiency in financial literacy, according to the Paris-based Organisation for Economic Co-operation and Development. That places American students in the middle of the pack worldwide.
Moreover, a 2016 survey from the Council for Economic Education reports only seven U.S. states require high school testing of personal finance concepts, with stagnation in mandates for personal finance education. Additionally, the number of states that require completion of economics courses is on the decline over the past two years.
In a 2015 national survey we found 42 percent of teenagers said they are not “financially fit,” and 2 in 5 teens would give up their smartphones if it meant graduating college debt free. A similar study in 2014 revealed 83 percent of teenagers do not keep a budget.
The juxtaposition of these statistics is stark. Teenagers show concern for the future of their financial health but aren’t taking the proper basic measures to set themselves up for success. With the continually rising costs of college education and a shortage of financial skills, young adults are greeted with shock upon leaving the confines of college campuses.
Seventy percent of college graduates, according to debt.org, leave school with student loan debt that in 2014 averaged $33,000. In total, U.S. student debt is around $1.2 trillion, with $3,000 of debt accrued each second.
It all starts with the basics: personal finance education. Whether at school or at home, students should have the opportunity to learn practical life skills, like balancing a checkbook, the importance of saving early and saving often, and how investments can benefit from growth over time.
“To be successful, most kids don’t need to learn about collateralized debt instruments, but they do need to know how to open a bank account, how much they need to save each month to reach their goals and, if they borrow this amount of money, how much money they will need to earn to pay it back,” said Nan Morrison, president and CEO of the Council for Economic Education. ”
The Council for Economic Education found students who learn these basic financial literacy skills are more likely to engage in financially responsible behavior such as saving, budgeting and investing, and have better average credit scores and lower debt delinquency.
These are the skills the younger generation must possess because before we know it, they will be the ones who have the money and run the country. Don’t we want them to run it properly?