Financial Literacy Is More Important Now than Ever
By Divya Sridhar, Ph.D., Policy Advisor at McGraw Hill
As we arrive on the heels of Consumer Financial Protection Week, it is no surprise that during its session last week, the CFPB focused the majority of topics on supports for some of the most vulnerable and risk-prone populations, namely students.
The topic of financial literacy has become more salient than ever in the aftermath of COVID-19, as financial insecurities and unknowns are woven into the fabric of the community, as a consequence of the federal, state, and local political and economic impacts of the pandemic.
As more communities are now hitting the “restart” button in the aftermath of the pandemic, students, educators, parents, and families face new challenges determining their next steps in their career and financial goals, continuing to face compounding student loan debt, assessing the risks associated with job loss and financial insecurities, determining whether to apply to or enroll in college or take a gap year, and much more.
The gravity and importance of the subject of financial literacy, which is “the ability to understand and effectively apply financial skills, including money management, budgeting, and investing”  has led us to take a renewed interest in the topic, and has led the company to continue engaging in the topic for its K-20 students, starting with basic education and mastery of financial literacy concepts from a young age.
How Does Financial Literacy Coursework Benefit Students?
Studies have found that providing students, as early in their education as possible, with foundational financial education skills and educational programs can build overall financial wellness. Unfortunately, the OECD’s 2018 PISA Survey results reveal that one in five US students fail to demonstrate more than a basic level of financial knowledge and skills, and students are performing below the baseline level of proficiency. 
This means that the vast majority of students struggle with simple financial management concepts, such as recognizing the value in budgeting for their future purchases and investments, saving for college, building strong credit, planning for retirement, buying a house, and other critical life decisions.
Of importance, research finds that building early personal finance skills has social benefits for students that can extend beyond school and support students in becoming self-sufficient in their professional and personal lives. Through financial management classes, students are provided opportunities to learn the basics of financial management: keeping and building a checking and savings account, making better pricing and buying decisions, good credit practices, and other activities which, over time, have the potential to increase the student’s overall net worth.
How is Financial Literacy Positioned in Federal and State Policy?
To date, a number of federal policymakers have advocated for increased access to financial literacy skills and coursework in higher education. Members of Congress have championed bills and initiatives that support the creation of a national financial literacy month, commissioned reports on the impact of financial literacy in higher education, and increased access to loan counseling programs for higher education students as they enter college.
But, few states have passed laws that require financial literacy coursework to be taken in higher education. Regardless, more and more colleges — including North Carolina State University and the University of Phoenix — have made financial literacy or student financial management coursework a requirement in students’ first year of college, claiming it is so foundational to future financial wellness.
On the other hand, nearly 21 states have passed laws requiring schools to offer financial literacy or personal finance courses at the high school level. Unfortunately, the vast majority of states stop short of requiring students to take the course as part of the high school course requirements for graduation.
Research suggests that mandating financial literacy coursework and programs is the most effective way to increase students’ access to financial literacy and better position students for their futures. While there is considerable, existing evidence of its direct correlation to students’ success, financial literacy courses are traditionally offered as economics, civics, or math elective, at best. We encourage more states to offer financial literacy coursework in high school, and request Members of Congress to encourage institutions to offer financial literacy as a requirement in higher education.
Why Increase Access, Funding, and Support for Financial Literacy Courses in K-20?
It is clear that students realize many benefits from having a strong foundation in financial literacy coursework in both high school and higher education. Financial literacy coursework (which may include Personal Finance, Financial Management, and/or Consumer Finance) is critical to the future of today’s youth and can support our nation’s high school, college, and professional students by increasing their preparedness for the workforce.
It is of particular significance for students to take these courses in high school, given that more students each year are grappling with challenges such as ballooning student debt and using financial aid to support their education.
Topics concerning financial literacy can include: good and bad credit, loans and borrowing, savings decisions, stock and bonds, investments, and more. Financial literacy coursework is supported by many key stakeholders, including faculty, educators, and administrators in the education community as well as non-education stakeholders, such as banks and financial institutions who are committed to improving students’ overall understanding of the financial world.
A number of financial public-private partnerships have formed through collaborations between key financial institutions and education stakeholders. Some of the well-known stakeholders engaged on the topic include: the Jumpstart Coalition, Higher Education Financial Wellness Alliance (HEFWA), Consumer Financial Protection Bureau, various financial banking institutions, school districts, and higher education institutions, and publishers like McGraw-Hill. These stakeholders understand the value of building a more prepared and fiscally aware cohort of youth that can make sound decisions about their financial prospects.
Yet, financial literacy has not received mainstream attention, resources, and the time it deserves to support students in their learning journeys.
Policy Recommendations in Financial Literacy
The U.S. Department of the Treasury released a 2019 report on behalf of the Financial Literacy and Education Commission that, in its best practices to institutions of higher education, recommends mandatory financial literacy courses for college students. There is a heightened need for federal and state policymakers to support Financial Literacy as a foundation for students in high school and higher education.
With regard to increasing access to financial literacy coursework for all students, we encourage members of Congress to:
- Incentivize high schools and universities to provide financial literacy courses to all students based on the recommendations in the U.S. Financial Literacy and Education Commission best practices report;
- Include financial literacy education as an eligible use of funds in key programs, such as career and technical education programs, workforce development programs, professional development and mentoring, and others; and
- Support legislation to recognize and promote the month of April as Financial Literacy Month, as well as supporting initiatives to highlight schools that are equipping students with financial literacy skills and increase awareness of the benefits of early financial literacy education.
A Look at How We are Incorporating Financial Literacy Into Our Curriculum
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Divya Sridhar, Ph.D., is the Policy Advisor for Government Affairs at McGraw Hill. McGraw Hill is a learning science company, serving students, teachers, and faculty with customized print and digital educational content, software, and services for pre-K through postgraduate education. In her role, Divya supports thought leadership on the company’s education policy priorities, relationship building with federal state and local policymakers, and strategic advocacy for the company’s business units. Divya has 10 years of combined experience in healthcare and education policy and has worked on issues such as interoperability, district digital transformation, educational equity, student data privacy, and funding for instructional materials.