How to close America’s financial literacy gap
In an election year, many issues vie for our attention. Complex matters like healthcare, social security, and taxes — that inspire endless opinions but have no easy solutions — are debated daily. One issue that we should all agree on without any debate: the need for financial education in schools. As a country we are failing in financial literacy. We owe it to our children to provide them with the best opportunity for a brighter financial future. By giving them a stronger grasp of the basic principles that can help them achieve their dreams — and avoid financial nightmares — we can help our nation as well.
Americans, on average, were able to correctly answer just three of five questions about fundamental financial concepts, according to a FINRA capability study. And less than 25 percent of students say they are prepared to deal with the financial challenges that await them in the real world. Yet while Treasury Department research shows that high school graduates in states that mandate financial education have higher savings rates and a greater net worth than graduates from states without financial education, only 12 states require that students take a personal finance course to graduate.
It’s up to all of us — parents, schools, government, private sector, and public sector — to give students the tools they need to succeed. We must take steps to ensure that our kids remain competitive and prepared for the future.
First, financial education starts at home. But parents are often uncomfortable talking to their kids about money, in part because many of them lack confidence in their own financial acumen. For many parents, it’s easier to talk to their kids about sex, drugs, and alcohol. Here are some easy things we can do as parents to reduce the discomfort and start the conversation:
- Use everyday experiences to talk about money. For example, use tax season as a reason to talk to kids or engage them in the process of budgeting for vacations.
- Talk to your kids about money by using milestones like saving for something special.
- Tell them about money mistakes you made when you were younger and what you’d do differently now.
Second, schools need to start making financial education a priority. Studies show that teachers want to provide personal finance instruction, but relatively few of them — only 20 percent – believe they have the capability to teach it. Today, 38 states may or may not be teaching the next generation about basic financial concepts, which are critical life skills they will need as adults. There are tools to help schools and teachers. For example:
- Non-profits like the Council for Economic Education are training teachers around the country, giving them effective ways to reach children in grades K-12 about personal finance topics, such as saving and investing.
- Jump $tart Coalition has an entire database of free financial education resources for teachers and parents. There are game sites like http://financialentertainment.org/ that have award-winning games, for both adults and kids, to teach such financial fundamentals as budgeting, interest rates, and saving.
Third, we need the commitment of the public and private sectors to bring about lasting change. Discover is making a $10 million investment to bring financial education to high school classrooms across the country through a program called Pathway to Financial Success. Over the next five years, we will offer grants to public high schools that adopt and measure a financial education curriculum. The program will work to prepare teachers across the country through the network of the Council for Economic Education, which trains thousands of teachers annually. We are also working with President Obama’s Council for Financial Capability and are planning to involve other corporations in this effort because we believe public-private partnerships are essential to address this problem.
When we teach kids about personal finance, we are giving them the ability to make good choices — a foundation on which they can build. We must help our kids understand, especially in the midst of difficult economic times, how to make sound financial decisions.
There is no debate. Providing financial education in schools will be of enormous benefit to our country immediately and will certainly help minimize financial pain in the future.
PHOTO: REUTERS/Carlos Jasso