Financial literacy can impact one’s standard of living. Three quarters of Americans live paycheck to paycheck. In a study from the Federal Reserve, nearly 40% of adults couldn’t cover a $400 emergency or an equal amount of unexpected expense. The nation may have some work to do when it comes to improving financial literacy, particularly among adults.
Currently, more than half of U.S. adults report being financially anxious, especially following the Covid-19 pandemic where many lost their jobs, had hours cut, or their wages reduced. Many also saw their 401(k) matches at work reduced or eliminated, jeopardizing their chances for successful retirement preparation.
Lawmakers are working to stem the tide of personal fiscal uncertainty by promoting financial literacy in high schools around the nation. Rhode Island recently passed a bill making it mandatory for all high school students to take a financial literacy class. Rhode Island is the seventh U.S. state to create financial literacy requirements for high school students. Alabama, Indiana, North Carolina, Tennessee, Virginia, and Utah have done the same thing. Several states also require financial literacy courses to be offered in high schools, however taking them isn’t mandatory. Others have requirements for financial literacy to be integrated into another course in the curriculum.
Financial literacy courses can help students to establish a solid foundation early. This education could be vital to their future financial success. Personal finances aren’t typically discussed at home. In fact, nearly 70% of parents have a tough time discussing finances with their kids, according to a 2017 T. Rowe Price study.
It’s possible, though, that offering financial literacy classes in schools will help shift attitudes and broaden families’ dialogue about money. It is beneficial for families and high schoolers to raise the subject at home. Providing financial literacy education early helps everyone. The goal is to raise future generations of “fiscally responsible” adults who aren’t doomed to repeat the past money mistakes of older generations.
Other benefits of financial literacy education in high school include:
Many students don’t choose to go to college. Others want to attend but do not know how they will pay for it. It can be one of the biggest financial decisions they’ll ever make in their lifetime. Most college students borrow money to fund an education. At the same time, they don’t understand concepts like interest and debt, nor do they comprehend how much debt is appropriate for their education.
Employers have challenges in helping encourage financial literacy in the workplace, when it comes to encouraging retirement savings. Using simple clear language to communicate financial concepts can improve financial literacy. Presenting clear definitions helps employees make appropriate decisions for their age and stage of life and goals when selecting investments for their retirement portfolio.
Financial literacy education in high schools is a smart first step. It helps a generation of adults who are able to adeptly and responsibly manage their money. The hope is that this will trickle throughout society and create more financial stability and security across the board. It’s encouraging to see lawmakers taking action on this important issue at the state level.
Stay tuned to see if additional state legislators follow Rhode Island’s lead on financial literacy course requirements in high schools.
