It’s Time Public Schools Focus on Financial Literacy
Students would feel better prepared for life after graduation if they enrolled in financial literacy classes
“Sir, why don’t they teach us useful things in school, like how to do taxes?”
One of my students blurted this out while I taught my lesson on feudalism.
Unfortunately, many students graduate high school without a basic understanding of financial literacy. More importantly, schools and states do not require financial literacy for graduation from high school.
With student debt standing at $1.6 trillion, it is long overdue for schools to require financial literacy classes as a graduation requirement.
What are the current graduation requirements?
Under the current common core requirements, students are required to pass four English, four history, at least three math, and three science classes.
Only Utah, Florida, Ohio, and New Jersey require students to enroll in a financial literacy course. In Michigan, students have the option of taking a financial literacy course, but most states in the United States do not require it for graduation.
Why don’t schools teach financial literacy?
Honestly, I too would love to hear the answer. Probably for the same reason some schools don’t teach Sex Ed. It’s considered taboo to talk about money and sex, even though both play a big role in our adult lives. And both can screw us over if we’re not responsible.
The only reason I can come up with is schools focus too much time on testing.
In Texas, students must pass five state exams: English I and II, Algebra I, Biology, and U.S. History. Schools spend an exorbitant amount of time teaching to the test because funding comes from testing. Underperforming schools will receive less funding, which explains why teachers teach to the test. Schools want more funding. Personally, I would love to know where this funding goes, but let’s move on.
Let’s be real here. Ask any teacher if the tests benefit their students in any way, and it’s unlikely they can give you an explanation.
Sure, students should know American history, and they should know basic writing, reading, and math skills. But why do schools focus solely on that? Why not go above that?
What are the benefits of financial literacy classes?
Students constantly question the importance of anything they learn in the classroom. “When am I going to use this in real life?” is a question asked often.
Financial literacy classes give students the opportunity to learn basic money management skills, such as credit card and banking fees, mortgages, loans, filing taxes, and budgeting. They will also learn how to choose a career path that’s right for them and learn the consequences of poor financial decisions.
Unfortunately, many high school and college graduates cannot do any of this.
Do you know how to manage your money?
I’ll admit, I’m guilty of this, along with many other millennials. We spend too much money on coffee, despite there being plenty of YouTube tutorials on how to make your own at home. After all, convenience is king.
With new trends and technologies popping up everywhere, it’s not surprising millennials are frequent spenders. Starbucks, Uber, iPhones, and brand-name clothing are all signs of wealth in the eyes of poor money managers.
“If you can afford the newest iPhone, it means you have money”, one of my students once told me.
But, of course, that totally makes sense! After all, when you can afford to spend over $4 on coffee daily, you must be good with money, right?
After all, spending $4 on coffee a day only amounts to spending $1,456 a year, or $58,240 over the course of forty years. That doesn’t account for inflation.
Buying the newest iPhone every two years at a price of $800 amounts to $16,000 over the course of forty years, and a $1,000 iPhone every two years amounts to $20,000 over forty years, again not accounting for inflation or taxes.
Let’s divide those $1,456 spent on coffee into twelve months, which is roughly $121. If a student was taught to invest those $121 a month instead of buying coffee, they would have an end balance of $299,056 after forty years on a modest 7% annual return on the stock market, and $671,592 on a 10% return on the stock market after forty years. I think most people would rather invest those $4 than buy Starbucks daily once they realize the long-term benefits.
The issue then becomes this: people don’t know how to invest. It’s imperative this is taught in schools. Unfortunately, our status quo chooses to focus on students memorizing pointless formulas and dates that an overwhelming majority won’t use after high school.
Does your job provide you with a decent income?
Most people rarely know what they want to major in once they graduate high school. While in college, most people change majors several times until they can finally decide on the right one.
Unfortunately, they might choose a career not knowing if there are any growth opportunities available in the field. While being a rehab counselor is respectable, one cannot help but point out they only earn $35,000 a year.
With student debt in the U.S. standing at $1.6 trillion, I hope the rehab counselor did not go $100,000 into student debt, because as Dave Ramsey put it,
“that’s on the stupid scale.”
Hopefully, anyone making $35,000 a year with $100,000 in student debt doesn’t intend to mortgage a $300,000 home, because that puts them far deeper into the stupid scale.
Unfortunately, schools do not teach students how to earn a decent income and how to live within their means.
Are you saving for retirement?
When we look outside the lavish lifestyle that millennials stereotypically live, we find something disturbing. Too many people are living paycheck to paycheck. People either don’t know how to save or can’t.
Too many people are forced to choose between paying rent or buying groceries. Too many people work multiple jobs and still cannot afford to save for retirement. Instead, they are forced to rely on loans to keep their head above the water, loans that will accrue interest, and prevent them from ever paying it back.
Unfortunately, even those who do save money are doing it wrong. Saving money in the bank is the equivalent of saving it under your mattress. It’s just sitting there. There is no growth potential because you’re not doing anything with it.
If a student was taught to invest their money upon graduating from high school, they would be able to earn a modest 7% return per year on the stock market. As I mentioned before, $121 invested per month over forty years provides a $299,056 nest egg. If you saved $121 in the bank monthly, you’d only have $58,240 after forty years. This money won’t be worth anything in forty years, thanks to inflation.
None of this is taught in the classroom.
The best part is students will teach their parents
I don’t remember ever explaining to my parents what feudalism was, or how to solve a quadratic equation, or why the mitochondria are the powerhouse of the cell. Once I began reading investment books, the first question I had for my parents was how much they had saved for retirement.
My father is sixty, and my mother is fifty-one. Since talking about money is considered taboo, the closest answer I got was they had saved money somewhere in the tens of thousands.
My father is five years away from retirement, yet my parents have no plan for how they will afford necessities once my father retires. Nor do they have a plan in the event of a medical emergency. In America’s healthcare system, where even with insurance, the medical bill can still run into the thousands or tens of thousands. This is terrifying.
If a high school student learns about saving, investing, money management, and retirement, they can teach their parents early on what they need to do, so their parents can properly manage their money and live a comfortable retirement.
It’s something low-income students need to learn, but schools focus on teaching students how to pass a test instead.
How do I get my school to teach financial literacy?
If you’re a parent to a high school student, you need to remember something. You are, in the eyes of a school, a customer. Schools will do anything in their power to keep their customers. It only requires you to send an e-mail to the principal where you show interest. Talk about the benefits of teaching financial literacy and the school will consider it.
If you’re a high school student, you are, in the eyes of the school, a product. Schools will do everything in their power to produce high-quality products. It only requires you and several other students to e-mail your principal. When enough students show interest in the class, the school will do what they can to offer it.
Granted, this is not guaranteed. Not all schools will offer it even when people show interest. But inaction produces nothing. There is no harm in sending an e-mail to your principal.
Ultimately, it’s up to you, the reader, to call for change in your local high school. As long as schools continue to teach to the test and focus solely on that, children in high school will learn nothing about daily decisions adults make in real life.
Children will continue to ask why schools don’t teach anything useful, like how to do taxes, and teachers like myself will not be able to provide them with an answer that will satisfy them. Meanwhile, I’ll continue to enjoy my daily $4 latte.