On the same day President Bush signed a $150 billion economic-stimulus package in an attempt to head off a recession and offset a crisis in the home-mortgage market, a group of financial experts and educators met a few blocks from the White House to craft a plan for better preparing Americans, young and old, to manage their money.
Financial education experts have been advocating teaching students economics and personal-finance skills for decades. But while they have seen progress in getting those lessons into the nation’s high schools, concerns about the foundering economy are helping to highlight the need to improve students’ understanding of money matters.
“There’s been a steady building in the recognition that we need to give students basic financial skills,” said Ted Beck, the president and chief executive officer of the National Endowment for Financial Education and a member of the President’s Advisory Council on Financial Literacy, which met for the first time last week. The Greenwood Village, Colo.-based endowment sponsors a financial-planning program for some 800,000 students in more than 8,400 high schools, and provides free materials and interactive lessons for promoting student and adult consumer education.
“It is very disappointing when you hear people saying that they didn’t know what they were signing up for when they got an adjustable-rate mortgage,” Mr. Beck said. We need “to grow and improve financial education both in the schools and in the workplace.”
Preparing citizens for the complex financial decisions they have to make when buying a home, choosing health-insurance plans, or investing in retirement funds should start early, many experts say. A growing number of states and school districts have been heeding that advice in recent years.
Economics content is included in all state standards, and 40 states feature personal finance as a topic in their core-content guidelines, according to a survey by the National Council on Economics Education, released last year.
But just 17 states require students to take an economics course and seven mandate a personal-finance course in order to graduate.
“This matter of economic and financial literacy is not just a marginal concern, it’s something that really affects us all,” said Robert F. Duvall, the president and CEO of the National Council on Economic Education in New York City and a member of the president’s council. The NCEE promotes long-term financial literacy, beginning in school, through its Financing Your Future program.
“We need to get basic, practical economics and personal financial decision-making skills into the heads and hands of our kids while they are in school,” Mr. Duvall said, “before they have to learn these things in the school of hard knocks.”
Paying for the Prom
In the business class Gary Tenhulzen teaches at Arvada High School on the outskirts of Denver, students have been planning a personal budget, analyzing the tax deductions on the paychecks they receive for part-time jobs, and setting financial goals.
“I’m trying to make them think beyond Saturday night,” he said. “I ask them who’s going to the movies or out to dinner and how much is it going to cost you. Then I ask, ‘Do you plan on going to the prom this spring and how are you going to pay for it?’ ”
Students in Lisa Moore’s personal-finance class operate a branch of a federal credit union, research and buy stocks, weigh the advantages of buying or renting real estate, and carefully consider the terms of credit card offers. Ms. Moore incorporates the national endowment’s financial-planning curriculum into an elective class at Arlington Career Center, a career and technical high school in Northern Virginia.
As a result, she said, her students are better prepared than most of their peers, and even many adults, to manage the financial decisions that loom before them as they enter college and the workplace.
“They all want a credit card, but they need to know about interest rates and what it means when they’re paying off the credit card making the minimum payments,” Ms. Moore said. Her students play interactive computer games that allow them to make decisions about which stocks to purchase, and discuss how changing mortgage terms have led to growing numbers of home foreclosures and downturns in related industries.
“A lot of these students are helping support their families, and know about paying rent, and they understand foreclosure,” she said, “so the conversations we’ve been having help them to understand these issues in real-world terms.”
Educators elsewhere are infusing similar lessons and discussions into social studies courses, mathematics problems, and consumer-science classes, as well as separate personal-finance programs. In Duval County, Fla., for example, teachers must include personal-finance lessons in the career research class that 9th graders are required to take.
At the Bronx School of Law and Finance in New York City, an electronic stock market ticker hangs on the wall of a virtual trading floor, part of a program to move students beyond basic economic literacy and prepare them for careers in the financial industry. Some 500 schools across the country have similar programs, sponsored by the National Academy Foundation, a privately financed venture between business leaders and educators.
Infusing financial education into the typical high school, however, could prove much more challenging, given the time pressures generated by growing curricular requirements and the need for better training of teachers, observers say.
Officials in the Mason City, Ohio, district are analyzing curricula offered by Junior Achievement and other organizations and trying to figure out the most effective way to fit the content in.
“We have three or four options for meeting the state standard,” by creating a new course or folding it into existing subjects, said Dan Langen, the social studies curriculum leader for the 10,700-student district in the southwest part of the state. The best options, he said, would allow more than a cursory coverage of the subject without draining valuable staff and budget resources.
Mason City and school systems throughout Ohio will have to decide how to provide personal-finance lessons to all high school students by the 2010-11 school year under a state law passed last year.
“We see this as a need because we believe students should [have] economic literacy, but doing it within the constraints of the budget and the school day is a challenge,” Mr. Langen said.
Credit unions and university extension services throughout the state are offering training sessions for teachers to build their financial knowledge and point them to free and low-cost resources for teaching the subject.
Influence on Family
Experts say lessons in personal finance tend to have a broad effect on students’ attitudes and behaviors when it comes to money.
“We want to influence decision-making, … and that’s going to influence behavior,” said Mr. Beck of the National Endowment for Financial Education.
An evaluation of the endowment’s high school program last year found the lessons significantly changed students’ views on personal spending. The percentage of students who understood the long-term costs of buying something on credit, for example, jumped from just 12 percent before the program to nearly 50 percent three months after it ended. Nearly three-fourths of the students completing the program said they realized the way they manage their money will affect their future financial stability, while just a third felt that way prior to studying the coursework.
In many communities, those attitude changes tend to spread to students’ families, according to Laura Levine, the executive director of the Jumpstart Coalition for Personal Financial Literacy. The Washington-based coalition promotes research, standards, and resources for financial education in schools.
“Many parents are unwilling or unable or uncomfortable about providing financial education to their own kids, or they’ve made mistakes themselves, or are part of the unbanked population. They are not going to be able to give their kids much guidance,” said Ms. Levine, a member of the president’s council. “Let’s give those kids who come from disadvantaged communities the financial background they need to improve their situation.”
When students take those lessons home, Mr. Beck said, they help promote the kind of ongoing financial education that many experts say is needed.
Teaching the basics in school “is a good way to get the information into the family. Financial education needs to be continuous, because the rules change,” he said. “We can’t guarantee that students are going to make the right decisions, but the fact that they are making informed decisions may help to head off some of the sad stories.”
