Why Don’t Schools Teach Financial Literacy?

Transcript of Podcast Episode 286

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, why don’t schools teach financial literacy?

A recent study by the National Financial Educators Council (NFEC) reached a startling conclusion: The majority of high school age respondents received a failing grade when it came to basic financial literacy.[1]

The study, which included more than 93,000 Americans, was focused primarily on people between the ages of 15 and 18 but included data from all ages 10 and above.[2]

The test included some basic questions in areas such as financial goal setting, automating your finances, getting and improving your credit score, risk management, long-term financial planning, investing and other topics.

The results were not encouraging. Fifty-one percent of respondents between the ages of 15 and 18 failed the test with an average score of 64 percent. Scores improved based upon the age of the respondent. Adults aged 51 and older had an average score of 78 percent.[3]

Why is this so important? NFEC highlights some of the issues they see high school graduates facing when they lack financial literacy, among them: [4]

1. Banking overdrafts and the resulting fees.
2. Credit-building mistakes, which lead to years of higher interest rates, fewer job opportunities, and difficulty getting loans.
3. Not understanding how to manage money when living independently, which can lead to financial instability and excessive debt.
4. Difficulties with job search, interviews and career advancement.
5. Being unable to deal with student loans. Lacking an understanding of the implications of failing to repay loans.
6. Overspending on a vehicle, which can result in financial strain and not having funds available for other expenses…and more.

NFEC argues that unlike other core subjects, 100 percent of students benefit from financial literacy training by teaching practical information that graduates can use in their daily lives. They contrast this with other subjects, where NFEC says the benefits are much lower. For example, they claim that less than 25 percent of math students learn information they will use for their employment or in their daily lives. They also claim that only 5 percent of science students learn information they will use for their employment or in their daily lives, while the number is less than 2 percent for American literature, and 16 percent for social studies.[5]

So why isn’t anyone listening? Limited time and competing priorities seem to be the most common answer, but there are others. Among them, a lack of any standardized curriculum, a lack of qualified teachers for the subject area, and resistance to change.[6]

NFEC calls for the elevation of financial literacy to the same standard as the other core subjects that students need to graduate.[7] That would be a good starting point.

If you wish to take the exam yourself, it can be found at https://www.financialeducatorscouncil.org/national-financial-capability-test/
…or in this program’s show notes.

[1] National Financial Educators Council. “National Financial Literacy Test Results.” financialeducatorscouncil.org. https://www.financialeducatorscouncil.org/national-financial-literacy-test/# (accessed May 28, 2024)

[2] National Financial Educators Council. “National Financial Literacy Test Results.” financialeducatorscouncil.org. https://www.financialeducatorscouncil.org/national-financial-literacy-test/# (accessed May 28, 2024)

[3] National Financial Educators Council. “National Financial Literacy Test Results.” financialeducatorscouncil.org. https://www.financialeducatorscouncil.org/national-financial-literacy-test/# (accessed May 28, 2024)

[4] National Financial Educators Council. “Policy and Standards Framework for High School Financial Literacy Education.” financialeducatorscouncil.org.  https://www.financialeducatorscouncil.org/wp-content/uploads/nfec-report-policy-and-standards-framework-for-high-school-financial-literacy-education.pdf (accessed May 28, 2024)

[5] National Financial Educators Council. “Policy and Standards Framework for High School Financial Literacy Education.” financialeducatorscouncil.org.  https://www.financialeducatorscouncil.org/wp-content/uploads/nfec-report-policy-and-standards-framework-for-high-school-financial-literacy-education.pdf (accessed May 28, 2024)

[6] Livewell.com.  “Why Isn’t Financial Literacy Taught In Schools?” https://livewell.com/finance/why-isnt-financial-literacy-taught-in-schools/ (accessed June 14, 2024)

[7] Randall, Steve. “All US states failing to provide adequate basic financial literacy education: NFEC.” investmentnews.com https://www.investmentnews.com/industry-news/news/all-us-states-failing-to-provide-adequate-basic-financial-literacy-education-nfec-251491  (accessed May 29, 2024)

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