How is personal finance taught in American schools?

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One of the most important steps to building wealth or achieving any major financial goal is to have at least a basic foundation of financial literacy. The question is, where do you get this education from?

Some countries are stepping in to ensure that the next generation is equipped to navigate the world with a solid understanding of credit, debt, budgeting, investing, and more.

As of this year, 18 states include some form of personal finance education before students graduate, According to Next Gen Personal Finance (NGPF), a nonprofit organization that provides educational resources and advocates for financial literacy in schools.

As part of the National Financial Literacy Month effort, CNBC will feature stories throughout the month dedicated to helping people manage, grow, and protect their money so they can live with true ambition.

The increasing trend of personal finance education legislation has caused the percentage of high school students secured in a personal finance course to rise to 40.5% in 2023, compared to 22.7% of students in 2022, according to the NGPF.

Personal finance is a huge umbrella. Determining which subjects are the most important, relevant, and interesting to teach students at a young age like kindergarten is not easy. Across the country in schools and other educational institutions, educators and economic professionals are discovering the best ways to teach kids about money.

When it comes to mandating personal finance education, it’s not as simple as legislators or school boards agreeing to the need to provide courses. Much work has gone into developing standards for each state that school districts then use to develop curricula for teaching required subjects.

Besides advocating for personal finance education in schools, organizations such as the NGPF and the Council on Economic Education are developing standards they feel will best provide students with necessary and appropriate financial education.

The National Council for Economic Education determines Six critical subject areas in their Personal Finance Standards:

  • Earn income
  • spending
  • rescue
  • investment
  • Credit management
  • Administrative risk

Developing local standards can be up to “everyone in the room,” according to Chris Cannon, chief program officer for the Georgia Council on Economic Education, who worked on personal financial education standards in Georgia.

“We kind of sit down and say, ‘Well, what’s one thing about budgeting that you think every kid needs to know about?'” Cannon tells CNBC Make It. Give us a laundry list.” And then we can’t teach all of that, so we say, “What are the basics?”

The NGPF also works on the policy side to help ensure that states effectively enforce personal finance education. Besides suggesting course topics, they endorse independent semester-long personal finance courses, rather than simply requiring some financial concepts to be taught in math, economics, or any other semester.

As of March 2023, about 24% of students have attended schools that adhere to the “gold standard” of personal finance education, According to the NGPFwhere it is required and comprehensive.

in order to [a personal finance course] To be comprehensive, actionable, and relevant, it has to include everything—banking, budgeting, investing, taxes, insurance, and paying for college.

Llanly Espinal

Director of Educational Communication at the NGPF

in order to [a personal finance course] To be comprehensive, actionable, and relevant, it has to include everything — banking, budgeting, investing, taxes, insurance, paying for college, and it has to include credit scores,” Llanelli Espinal, director of educational outreach for NGPF, told CNBC Make it. “There’s no way you can do all that in just two weeks of another semester.”

Despite the differing standards and course descriptions, educators from different locations generally agree that teaching students how to make informed decisions is at the heart of all personal finance education.

“The single biggest issue so far is decision making — balancing costs and benefits, marginal cost and marginal benefits and thinking about future consequences as best you can,” Cannon says. “This topic is really a major in economics, and we look at personal finance as an extension of economics.”

There are many intrinsic topics for getting into personal finance from understanding the power of compound interest to knowing the challenges of adjustable rate loans. Cannon and other experts say decision making provides a framework for students to delve into those deeper topics on an as-needed basis.

Not every student will go to college, for example, but all students should be equipped to make that decision after weighing costs and benefits.

“Personal finance instruction includes teaching things like budget management, stock picking, diversifying your portfolio and insurance, and those things are really important to learn, but they’re not particularly relevant to 16- or 17-year-olds, let alone the average,” said Scott Woola, economic education officer. at the Federal Reserve Bank of St. Louis for CNBC Make It.

“But really, everyone makes decisions every day and many of those decisions are financial decisions.”

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