The US needs financially literate youth: States can lead the way

Lately, headlines are overflowing with terms such as “recession,” “inflation,” “economic downturn,” and “rate hike.” There is a lot of concern about the status of global and personal finances, which is not surprising given the United States’ recent track record in shattering debt records. 

For instance, household debt rose to $16.15 trillion in the second quarter of 2022, up $312 billion from the previous quarter. The increases reflect mortgages, auto loans and credit card balances and they don’t affect everyone equally. Debt is rising faster among younger generations, and people of color are disproportionately affected by student loan debt.

These are complex financial challenges that require solutions from multiple sectors. But there is a key place to start rewriting the headlines — and that’s in K-12 schools nationwide.

To ensure our youth and future generations don’t face the same grim financial outlook as millions experience today, financial literacy education must be in every public school system. Schools, as well as families, play a vital role in ensuring young people are financially literate before applying for jobs, credit cards, student loans or mortgages.

State policymaking is a key first step and, luckily, a growing number of state legislators on both sides of the aisle agree that it’s crucial to teach our youngest consumers how to manage money, seek funding for higher education or career interests and maintain sound credit. 

Over the past five years, this relatively new approach has gained traction. In 2021, 38 states, Puerto Rico and the District of Columbia considered financial literacy legislation. The legislation spans an array of policies, from efforts to encourage districts to offer financial literacy courses to making financial literacy a graduation requirement. As of 2022, 15 states have implemented or are in the process of implementing requirements for school districts to offer a financial literacy course, up from five states in 2018. Moreover, as of 2020, 45 states include personal finance in their education standards. 

Legislation, requirements and standards are, however, just the beginning. As education researchers and policy analysts, we can say with certainty that the success or failure of any education reform lies in what happens next. How can policymakers, district leaders and teachers implement the reform? Here are the steps that we recommend.

First, when making financial literacy legislation, policymakers should convene experts and those impacted by the policy to examine the current context. These include the available teacher workforce and how to promote equity, particularly among students who have been historically or are currently marginalized. 

Rhode Island took this approach and convened a working group to advise on the implementation of their recently passed legislation requiring all students to demonstrate proficiency in financial literacy in order to graduate. The state legislature took this equity-centered approach to ensure that every student in the state receives financial literacy instruction.  

Second, leaders of states, districts and schools need to support educators in teaching high-quality financial literacy content. This can be done via resources, such as these from Rhode Island, related to curricular materials and professional development for teachers. Many educators do not have backgrounds in financial literacy and may be assigned to teach a financial literacy course as part of their mathematics course or their social studies course, or even as a standalone course. Equipping them with high-quality resources and training is essential to ensuring that all students not only receive the opportunity to engage in financial literacy but to become financially literate. 

Third, teachers should make financial literacy content relevant to students because young people learn best in authentic environments that allow them to connect learning to their daily lives. Teachers should consider ways to draw on students’ personal lived experiences and worldviews. This could include inviting a local bank representative into the classroom to assist students with setting up checking and savings accounts, discussing how different deductibles affect the cost of car insurance when students are getting their driver’s licenses, or digging into the student loan process and comparing rates when students may be applying for college. 

As we laid out in an August brief, these are the types of considerations that leaders and teachers need to think about in order to effectively and equitably implement financial literacy policies that can reach and teach all students. Our country can’t afford to do otherwise. 

Given today’s economic climate, our young people are facing fiscal precipices. We need to equip them to navigate this landscape and make wise decisions about spending, saving and borrowing. We can start helping them with this as early as kindergarten, and we need to start helping them today.

Jessica Bailey is a research scientist and Diana Wogan is a project director at Education Development Center.