This article was reprinted with permission from NerdWallet.
Most of us don't learn how to manage our money until we have to make a financial decision like renting an apartment or applying for a credit line. What if you could learn about budgeting and credit scores in a low-stakes classroom? Although it may not sound fun, it is more practical than trigonometry.
Although financial literacy was not a priority for schools in the past, it is now. Over the past decade, more states have required personal finance instruction in schools than ever before. More people are becoming aware of the importance learning about money since the 2007-09 recession and the escalating student-loan debt.
Teachers say that parents and students are more interested in personal finance now than ever because of the pandemic. In just one year, more than 20 states have introduced bills to include personal finance classes into high school classrooms.
Finance is taught in states.
The state dictates how personal finance is taught at schools. According to research by Carly Urban (an associate professor of economics at Montana State University), 22 states required that high school students receive some personal finance education for the 2020-21 academic years. Urban's research and that of others has shown that teaching high school students basic personal finance concepts can lead to better credit scores and lower rates for adults who are indebted.
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Personal finance education requirements are different. In some states, a course must be offered in high school as an elective. Some states allow personal finance concepts to be integrated into other subjects like economics and mathematics. The curriculum of a standalone personal finance course can be out-of-date, which can lead to teenagers lacking real-world skills.
In a world where Venmo [a money transfer app] is ubiquitous, teaching young people how to write checks is not enough. Tim Ranzetta, cofounder of Next Gen Personal Finance (based in Palo Alto California), says that the organization provides curriculum and professional development free of charge for personal finance teachers across the country. Next Gen supports personal finance being offered as an optional stand-alone course throughout a semester.
Urban states that the most important concepts students should understand are credit scores and credit reports, how financial products such as loans compare, and how to balance savings, debt repayment, and manage expenses.
Pandemic makes it easier to talk about money
Urban says that personal finance classes existed before the pandemic. They were often led by teachers who had been in financial trouble and realized how important it was to teach children about their mistakes.
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This is how Renee Nelson, assistant department chair of the math department at KIPP NYC College Prep in the Bronx, got it done. Nelson began sharing her story with students to help her pay off her credit card debt. Nelson created a personal finance course for students that can be used for college credit and workshops for parents.
Teachers claim that the pandemic brought money discussions back to the forefront, as everyone was in a crisis.
It gave some real-world problems in the system, things you don't expect that can turn your plans upside down. William Joy, an instructor in marketing and personal finances at Lucy Garrett Beckham High School, Mount Pleasant, South Carolina, said that it provided some real-world challenges in the system. Joy said he would discuss budgeting examples with students, giving them a fixed salary and asking them to allocate money for different expenses. I would then say, "Uh-oh, the pandemics have hit you now, how will you spend it?"
Money can be taboo outside of school. The past year has given families more time to get together and allowed them to discuss it openly, as many parents lost their jobs or had their income decrease. Gregg Murset is a father of six and is a certified financial planner. He also founded BusyKid which teaches children about money.
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According to educators, the pandemic also sparked students' interest in building savings, investing in stocks, and cryptocurrency.
Financial literacy is not a magic bullet
While financial education can be helpful, teachers know that it does not address the root causes of racism and injustice. This is part of the lesson they want students to learn.
Nelson's students are Black and Hispanic and live in low-income housing. They are often the first college-bound family members. Nelson said that her students saw rioting and picketing at their doors during the 2020 social justice marches. They brought their questions to the classroom. Nelson used this opportunity to show them how decades of discrimination has led to economic inequalities and how they can get involved in efforts to create long-term changes.
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Nelson states that most of them don't know why their family is stuck in poverty. It was a wonderful way to connect back to the reasons there are so many problems in our community.
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NerdWallet is written by Amrita Jayakumar. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay
