Closing the Gap in Economic Education: Financial Literacy Begins in the Classroom

Like most young adults fresh out of college, saving for the future wasn't my top priority when I landed my first job. Left to my own devices, I can't say for certain I wouldn't have spent almost every cent of those paychecks, if not for my father reminding me once a week, every week, to contribute to my 401(k). He never missed a call -- and I never missed a payment.

But not everyone is so lucky to have a mentor like I did.

Parents are Lacking in Financial Know-How

If there's one lesson we've learned from the recent recession and its painful fallout, it's that an alarming number of Americans lack the basic dollars-and-cents understanding they need to navigate today's global economy. The gap between what people know and what they need to know is widening every day.

Just consider these stats:

  • Only 49.7 percent of U.S. adults can define a "budget deficit."
  • 9 million households have neither a checking nor a savings account.
  • 29 percent of Americans have no savings at all.

It would seem that an overwhelming number of American adults are ill-equipped to instruct their children in economics and personal finance. But they're not the only ones.

Teachers and Schools Come up Short on Economic Education

Many teachers are also woefully under-educated when it comes to financial literacy. In a recent survey, 20 percent of teachers stated that they do not feel competent to teach basic personal finance. And those who actually teach economics to high school students have often received minimal college instruction in the subject.

That said, some schools have ramped up financial education requirements in the years since my organization, the Council for Economic Education, has been tracking their progress. In the year 2000, only seven states required a high school personal finance course to be offered; by 2011 that number had doubled to 14. But our most recent Survey of the States shows that in the past two years, that momentum has slowed, and in some cases even come to a halt.

The data are disappointing, but they are also a good reminder that progress doesn't happen by itself. It's clear that we need to do a better job of providing a solid foundation in economics and personal finance in our schools. And, as both educators and students can attest to, the earlier we start, the better.

Innovative Educators Pave the Way

Raising awareness about the need for greater financial education is an important first step. Now, we face the challenge of making it happen. A great place to start is by learning from the innovators.

In her written testimony for the Senate Subcommittee on Oversight of Government Management hearing on financial literacy, Sharra R, Jones, a teacher at Oak Park Elementary School in Laurel, Miss., described how she made financial literacy a daily part of her third-grade curriculum. Students who display good behavior are rewarded with "Dragon Dollars," which can then be used to "buy" various items. To drive home the point that it was better to save than to borrow, Ms. Jones added a twist:

"I would loan my students' dragon dollars so that they would be able to buy the bigger prize. But when they realized that they would have to pay me twice as much money back to repay their loan ... they stopped asking to borrow dragon dollars on credit and started saving to buy what they wanted."

Meanwhile, at the state level, programs such as $mart Tennessee are setting the K-12 standard, offering a complete model in order to teach children how to make sound decisions about money. The program includes developing an integrated curriculum, providing teacher training in both content and teaching skills and providing engaging resources for both students and teachers, such as Financial Fitness for Life (FFFL). And the assessments show dramatic results in student knowledge.

Early Economic Education Pays Off

By integrating financial literacy into everyday learning, students emerge better prepared for college and the workforce. Just ask Towson University student Evan Richards.

As a member of the Academy of Finance at his high school, he learned the basics of investing, personal budgeting, and even how mortgages and interest rates worked. Armed with this skill set, he has been able to budget accordingly for college and excel in his coursework. In his own words when testifying before Congress last week, "it starts with simple instruction, and leads to a lifetime of security and opportunity. ... This type of education should be available to everyone."

Closing the Gap in Financial Literacy

From the national level down to the individual teacher, there are many efforts underway to improve economic and financial education, increase requirements and find better ways to assess literacy levels. But it's something we all need to continue to work on together. We know that financial and economic literacy changes the way people see the world and their roles in it. Ignorance is not an option we can afford.