Americans are facing a record $13 trillion in debt. Many say that in order to combat the debt crisis, financial education should start earlier and high schools should be required to teach personal finance to all students. Others point out that research shows lessons on financial literacy in high school have no long-term impact on financial behavior. Should financial literacy be an educational requirement?
According to Money, the average millennial household "owes $14,800 in student loans." Writer Kerri Anne Renzulli explains that while debt averages vary across each generation, people of all ages are demonstrating a greater comfort with debt. As everyone becomes more comfortable with financing and credit, there is a greater risk that accumulated debt will never be paid off in full.
'Younger people are taking on debt at a higher rate and paying it off at a lower rate,' says Lucia Dunn, an economics professor at Ohio State University who has studied consumer debt. 'When they reach age 75, the debt picture for them will look a lot different than what we currently see. When you project out these trends, it is not so optimistic.'
The country should take a proactive approach in preventing debt from spiraling further. Requiring personal finance in high schools with the goal of establishing financial literacy in young people before they become independent is a logical first step.
Even students understand that financial literacy is an invaluable skill. Considering most people have to learn the hard way when it comes to establishing credit, budgeting, and saving, students recognize that personal finance classes in high school could be life-saving.
According to U.S. News' Stacy Rapacon:
The number of states that require a high school personal finance course in order to graduate has been stagnant at 17 since 2014. Likewise, only seven states have required standardized testing on personal finance since 2016.
San Diego-based certified financial planner Taylor Schulte offers stronger criticism. 'I think the state of financial literacy in schools is pathetic,' he says. 'Our school systems will spend countless man hours debating how math should be taught while most students don't even know the difference between a credit and debit card. It does seem like things are starting to move in the right direction, but we are a long way from where we should be.'
Although it may seem like common sense, research shows that personal finance classes don't actually make a difference for most students later on in life. According to U.S. News' Susannah Snider, researchers say financial literacy can't be taught in the same way "geometry or German" might be.
'Thus far, the empirical work doesn't show much of an effect [from financial literacy courses],' says Lauren Willis, professor at Loyola Law School in Los Angeles. 'Some findings are that there are negative effects sometimes, presumably because of overconfidence.'
For example, a 2014 paper from three professors looked at the results from nearly 170 papers covering more than 200 scientific studies on financial literacy and found that financial education did little to improve subsequent financial behaviors. 'Our meta-analysis revealed that financial education interventions studied explained only about 0.1 percent of the variance in the financial behaviors studied,' the authors concluded.
'It's a hugely wasteful enterprise, these high school courses and things like that,' says John G. Lynch, co-author of the study and senior associate dean for faculty and research at Leeds School of Business at the University of Colorado--Boulder. 'By the time [students] would actually act on what they learn, it's gone.'
Fifth grade is perhaps a bit too early to have meaningful lessons on the topic.
According to pension fund analyst and fiduciary expert, John Lohr, high school is the last place for financial literacy to be taught. Lohr acknowledges:
Many of us believe that financial literacy is a core life skill that should be taught in every school and college.
But he also points out:
'State mandates requiring high school students to take a personal finance course have no effect on savings or investment behavior,' economic researchers from Harvard, Wellesley College and the Federal Reserve Bank of Chicago found in a study in 2014.
Requiring financial literacy classes in high schools is a classic example of throwing what seems like a logical solution at a problem before it has been properly researched. Changing a curriculum state-wide is a massive undertaking, and so far, research shows that a financial literacy requirement would not benefit students as much as the public may think.