– J. Michael Collins, Ph.D., Center for Financial Security, University of Wisconsin-Madison
Schools play a significant role in the lives of young people as they develop into independent, capable members of communities. Starting at young ages, schools teach kids to be safe, to be healthy, to be civic-minded, and, at least in some states, to be responsible for their personal finances. But there is wide variation across states in terms of what sorts of economic and personal finance education is offered to students. Some states offer little guidance to school districts related to what personal finance content to offer in schools at each grade level; others have pushed ahead, requiring courses from elementary to high school-aged students, supporting and training teachers, and in some cases even testing students on learning outcomes.
The variation in approaches allows us to study how different strategies work. In states where personal finance is part of a formal course, teachers are trained on the content, and students are tested, students develop better credit behaviors early in adulthood. Students who graduate after more rigorous standards are put into place are more likely to make on-time payments and keep up with their bills—they still use debt and credit, but seem to understand how to manage those obligations better than students who did not graduate under higher standards for personal finance and economics. The figure below shows the difference in credit scores for students who graduated before financial education mandates were imposed, relative to comparable states and controlling for local trends. Student credit scores are 8 to 17 points higher by age 22 in three key states that made a change in financial education policies in 2007.
States that combine personal finance and economics, support teachers, and hold students accountable for learning objectives have the best chance of promoting the development of young people who are better financial managers and stewards of their credit—behaviors with which many, if not most, young people tend to struggle. Rigorous state standards can facilitate local schools to implement well-designed programs, which in turn expose students to concepts they otherwise would not learn. Communities may also benefit from having more financially competent households; perhaps stronger economics and personal finance standards could even be viewed ultimately as an economic development strategy, developing young people with an increased ability to manage credit and invest in their future.
Policymakers seem to understand, at least in some areas, that state support for economics and personal finance matter. There is still much to learn about the optimal blend of topics, testing and grade levels, but support for economics and financial education, from grade school to high school, is valuable for students and communities.
Visit our website, http://SurveyoftheStates.com for an interactive experience and download the study. And, find out where you state stands in economics and personal finance education and how you can take action today.