Personal financial education can lead to smarter decisions

Personal financial education can lead to smarter decisions

The sudden interest in financial education is being attributed to a rising concern over the burden of student debt, as well as a heightened awareness about income and economic inequality, all due in part to the pandemic. A recent article in The New York Times pointed out that two dozen state legislatures are finally considering bills on financial literacy, an unusually high number according to those who have studied the issue.

I would disagree. While the pandemic may have helped bring the problem to the forefront, it is one that has existed for as long as I can remember. In the latest round of legislative proposals, some states are merely encouraging the teaching of financial skills, while a few would make the subject a graduation requirement.

In states that do not require financial instruction, some schools opt to teach it and do an excellent job, but others ignore the subject. It should be no surprise that those that do ignore it tend to be schools in less affluent districts. For example, Ohio is considering a proposal that would require high school students to pass a half-credit class in personal finance to graduate. The class must be taught by a teacher trained in the subject matter.

Still, the rigor of high school financial education varies. Just six states require high school students to complete a semester-long, stand-alone personal finance course, the council’s 2020 report found. Some states permit shorter courses or include the content as part of another class. According to the Council for Economic Education, which promotes economic and personal finance education, it has only been since 2020 that high school students in 21 states are now required to take a personal finance course to graduate. A net gain of four states since the previous count two years earlier.

Many financial literacy advocates consider a full-semester course the gold standard for personal finance instruction. The bill would also create a fund to help pay for training to teach the subject, said State Sen. Steve Wilson. “Kids come out of school having no clue about financial literacy. They go out into the world greatly disadvantaged,” he said.

Several groups, including the Council, can provide guidance through its publication of national standards and benchmarks. In addition, the University of Chicago’s Financial Education Initiative has created a list of characteristics required for “high quality” financial education. Tragically, the realization comes too late in life. The price paid is a lack of home ownership and an inadequate nest egg for retirement. In my opinion, based on my years of teaching experience, that is just the startling point. Unfortunately, few individuals really understand the importance of both an investment education, and more importantly the need to start investing early.

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