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A high school course so in demand that students are willing to sit on the floor and review the class without earning points?

While it may sound like a unicorn, the description is matches a personal finance elective introduced last year by Stuyvesant High School in New York City. “It’s something that every kid kind of has to do, and we’re kind of forced to do it in our own time, with no guidance,” said Anisha Singhal, a senior at Stuyvesant who was an advocate not only for the school one establishes compulsory electives, but also for New York to mandate financial literacy education in all high schools in the state.

While Stuyvesant created its own course, New York State has yet to codify a separate personal finance requirement. The state legislature has introduced numerous bills since 2009 aimed at mandating financial literacy courses in high schools, but none have passed. The latest version has stalled in committee this year, although its sponsor, Senator Leroy Comrie, plans to reintroduce it in January.

Momentum for financial education at the state level

There is reason to be optimistic about the potential passage of New York City’s law in 2023, given the growing momentum at the state level for personal finance needs in high schools. In April, Georgia enacted a law requiring high school students to complete a half-credit financial literacy course as a requirement for high school graduation. Florida, Michigan, Nebraska, Ohio and Rhode Island also recently passed legislation. Other states, including South Carolina, Minnesota, and New Hampshire, have similar laws making their way through the legislature. A total of 12 states require or will soon require a standalone financial literacy course as a prerequisite for the degree. In addition, 25 states require some financial literacy courses to be included in the curriculum, including as a unit within an existing class such as math or economics.

The timing couldn’t be better as many of today’s high school students are preparing to dive into a real-world financial pool without even knowing the basics of personal finance. Just like the recent financial shocks of the pandemic illuminated, not only is the water quite deep, but there are plenty of sharks and unfortunately not as many lifeguards as one would hope. “The need has never been greater” said Annamaria Lusardi, Founder and Academic Director of the Global Financial Literacy Excellence Center at George Washington University. “We owe it to this young generation to be well prepared for the future.”

Dismal levels of financial literacy among Americans

Numerous studies have shown that high school students, like most Americans overall, have a strikingly low level of financial savvy. Professor Lusardi conducts an annual survey that measures financial literacy on topics such as saving, borrowing and investing. Unfortunately, the 2022 results show little change in Americans’ financial literacy and little variation across age groups. On average, adults in the US could only answer 50% of the questions correctly, with Gen Z doing the worst.

More specifically, many high school students face an educational experience that increasingly places a heavy burden of debt on the students. Two-thirds of those who received bachelor’s degrees in 2020 graduated in debt, compared with less than half in 1993. Most students “do so without fully understanding how much debt is for their education or the connection.” are appropriate between their field of study and the level of income they can expect after graduation, and many students enter college without understanding financial aid, loans, debt, credit, inflation, budgeting and creditworthiness,” according to the Center for Financial Literacy’s Champlain College.

Additionally, students have even more access to financial instruments such as credit cards, which can quickly add to already significant debt. The percentage of students using credit cards in college has increased over the past decade from 28% in 2012 to 46% in 2022, and a recent survey of 20,000 college students conducted by AIG Retirement Services and EVERFI found that Students rely more on credit cards. The survey found that 40% of students will have total loan debt of more than $1,000 in 2022, up 7 percentage points from the previous year. A more troubling finding was that 38% of students don’t plan to pay their bill every month, meaning they are incurring double-digit interest rates.

Consequences of early financial mistakes

Financial mistakes in early adulthood could have significant consequences after graduation. A lower credit rating could result in not being able to secure loans, rent a home, or even employment in some states; It could also mean incurring tens of thousands of dollars in additional loan interest costs due to a higher interest rate on a mortgage or the inability to refinance student loans. As Robert Manning, author of Credit Card Nation, summarizes, “While freshman students and their parents are likely to think more about tests and academics during orientation, the fact is that a student’s post-graduation credit score is arguably much more important to his or her future.” than the grade point average.”

These findings are part of the reason why the inclusion of a personal finance requirement in high schools is so important. Financial literacy helps young adults make better financial decisions and leads to better financial behaviors. Financial literacy has been shown to reduce the likelihood of using alternative forms of borrowing such as payday loans. It has also been positively correlated with wealth accumulation in early life. A study that focused on credit outcomes found that states with three states with financial literacy requirements saw increases in credit scores and decreases in delinquency rates among participants. “The results are stark,” says Carly Urban, an economics professor at Montana State University said Bank. “Credit ratings are rising and default rates are falling. When you borrow a student loan, you go from high to low interest rates and you don’t accumulate credit card debt and you don’t take out personal loans, which are more expensive.”

Why some financial literacy laws have stalled

As momentum builds, not all financial literacy bills have made their way through state legislatures. There are three issues that may explain why legislation has stalled in some states: a respect for local county rights; the perceived opportunity cost of offering personal finance electives; and the potential difficulty of finding a qualified teacher to teach. For example, earlier this year in Wisconsin, a financial literacy bill died over concerns that it could come at the expense of career electives. “We try to add [career-training] Experiences to meet the demands of the job market with more than a high school degree and less than a four-year degree,” said Ben Niehaus, director of membership services for the Wisconsin Association of School Boards. “There are only so many hours in a day.”

States need to focus on the curriculum

With the unmistakable trend toward codifying financial education courses in high schools, an area of ​​focus for states and schools should be pedagogy and curriculum. Examples should be tailored to be consistent with high school student experiences and prominent life events. Stuyvestant’s class, for example Has Seniors review their college admissions financial aid packages and help personalize the experience for students.

linkedinHow to Stop Boring Students Teaching Personal Finance

Unfortunately, some states’ programming may be too antiquated and specific. Florida curriculum contains Lessons about “settling a checkbook” and “receiving an inheritance” strike me as potentially anachronistic and exclusionary. More importantly, many state curricula don’t address how to evaluate financial advice, including what high school students need to hear on social media sites like TikTok. Course content also needs to be more future-oriented and “include discussions about new financial tools like payment and trading apps and digital money, because students are already hearing about according to to Tim Ranzetta, co-founder of Next Gen Personal Finance. “You better talk about cryptocurrency.”