The New America Foundation, a think tank in Washington DC that I respect very much, recently posted this white paper on the topic of financial education in schools. It deserves to be reprinted here. The author is Karen Murrell, one of their senior advisers on their asset building initiative. See newamerica.net for more information.

Recently there has been a lot of attention on the lack of financial education in the United States. Some experts have suggested that we need to educate people at an early age in order to reverse this trend. Although providing financial education in schools seems like a logical way to provide financial education to youth; however, some research appears to show that delivering financial education in the schools is not effective. The Jump$tart Coalition for Personal Financial Literacy has been conducting national surveys of high school seniors to measure their financial literacy biennially since the 1997. The 2008 survey had the lowest score of any survey issued to date, with high school seniors answering just 48.3 percent of the financial literacy questions correctly.

Although there is a desire to help youth improve their financial decision making, state and local officials are struggling to determine how best to provide financial education in schools. Only three states require at least a semester-long personal finance course. Teachers are stretched thin and are often overwhelmed with the thought of adding personal finance to the list of topics they are required to teach. They also struggle with getting students excited about complex concepts like credit card interest rates and loans.

The New America Foundation recently convened a meeting of national experts working to provide financial education in the K-12 school system to discuss strategies to expand the quantity, quality and effectiveness of financial education provided in schools. The following is a list of suggestions that these experts believe will help facilitate increased financial education in schools. Suggestions fall into four broad categories: pursue research and knowledge initiatives, develop an influence strategy, enhance financial education in schools, and develop legislation and regulations based on effective practices at the state and local level.

Pursue research and knowledge initiatives

• Define financial competence for each grade level. Although many experts will agree that there is a need for financial education for youth, there is no consensus about what this means. Clear financial education standards, benchmarks, and competencies that lead to positive financial behavior need to be uniformly adopted. Additionally, continuous research and evaluation should be employed to measure the impact of financial education provided on knowledge gained and behavior changed.
• Pursue research opportunities to probe lingering questions about personal finance education at the state level. Some states are interested in providing financial education in schools, but want to know more information about the experiences of other states that currently require a personal finance course or that integrate personal finance into other subjects. Through a national survey of states, additional information can be collected and disseminated.

Develop an influence strategy

• Develop a logic model that will inform an influence strategy. A logic model should depict all of the potential audiences and organizations that need to be educated and influenced in order to expand financial education in schools. The logic model will be used to help identify strategic opportunities to collaborate with others to promote the need for increased financial literacy in grades K-12.

• Explore ways to incorporate parental education as part of financial education in K-12. There is anecdotal evidence that teaching youth about financial education provides an opportunity to educate their parents as well. Explore ways to develop an intergenerational model that provides financial education to both youth in schools and their parents.

Enhance financial education in schools

• Promote early financial education. Much of the financial education that occurs in schools is targeted to high school students, but some experts believe that waiting until high school to teach personal finance is too late. Students have often developed attitudes and beliefs about money long before high school. Focusing on financial education throughout the school years, with a particular focus on education in grades K-8, provides a better opportunity to influence positive behavior change. Additionally, a focus on early education would address the fact that a significant number of students drop out of school and might not receive financial education if it is only offered in high school. Early education ensures that students who don’t complete high school will receive at least a base level of personal finance education.

• Require a financial education capstone course for all high school students. Experts believe that even if financial education is integrated into core courses and provided through grades K-11, a personal finance capstone course is needed in grade 12 to reinforce the information learned in earlier grades and prepare students — both those going on to higher education and those directly entering the workforce — to adopt appropriate financial strategies for the next stage of their lives. In addition to exploring ways to implement a capstone course in grade 12, consideration should be given as to whether or not financial education should be anchored one particular subject in grades K-11. Currently, financial education can be integrated into any subject.

• Provide teacher training and resources. Ensure that teachers at all grade levels are trained in personal financial management, and are taught how to integrate personal financial management concepts into the curriculum. Provide sufficient resources to enable teachers to acquire quality, interactive educational materials that are age appropriate. Explore the most effective way to incent and support teachers to provide financial education and determine the right balance between issuing mandates and encouraging voluntary efforts.

Develop legislation and regulations based on effective practices at the state and local level

• Develop model legislation and model regulations that highlight best practices for states and local government. Work with a core group of states that have passed financial education legislation or regulations to determine the components that are most effective. Based on this information, develop a model law and regulations that incorporate best practices from various states. Other states can use these documents as a starting point for developing their own financial education legislation and regulations.

• Tie funding to effective practices. Once there is consensus about effective practices for states to implement financial education in the schools, both federal and state funding should be tied to adoption and implementation of these practices. This ensures that funding is directed in a manner that supports the most effective practices.

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