End Financial Illiteracy - Teach Personal Finance in Schools

According to the 2011 Teens & Money survey by Charles Schwab among 16-18 year olds, 86% said they would rather learn about money management in a class than to make financial mistakes in the real world. By the time they leave high school and go to college, many teens already have a job, pay taxes, have a checking account, a credit card, and some level of debt. It’s important for college students to know how to manage their own money. Half of my classmates believe that personal finance should be a required course, and I agree because it really would benefit all students. 89% of my class learned about money through family, myself included. Lessons on money and finance have been traditionally taught at home. But what if our parents didn’t have good practices when it came to money? That meant that we were probably going to follow them and their behavior – because as the saying goes, “children live what they learn”. Let me just say that I wasn’t prepared.
I propose to amend education policy to add a new section that will establish requirement of instruction in personal finance beginning in the 4th grade. We are in a financial state that will not be fixed by the government or through workplace benefits, and people need to have a financial plan. In our culture, we are constantly tempted with trends and incentives from vendors and lenders. Without any protection from banks and vendors, many people are tempted to make poor financial decisions. There are 3 main reasons why we need personal finance instruction in schools.
1. All students should have the same knowledge base.
2. We need to understand money and finance, so that it won’t be used against us.
3. The younger we start actively saving, the better we can become at making good, sound financial decisions.

While basics of money and finance are not taught in the classroom, students are expected to understand subject matter in economics, statistics and calculus in high school. With this knowledge, I believe that we need to start at the elementary level in order to reinforce basic concepts about finances.

All students should have the same knowledge base.

1. According to the Council for Economic Education, only five states require financial literacy courses for high school graduation: Georgia, Idaho, Kansas, Louisiana, and Tennessee. ALL 50 states should be on this list, however, New York needs to be on this list because our residents need to plan accordingly, so they can remain in New York, and not have to move elsewhere due to costs of living.


2. In order to ensure that all children have the same knowledge base, it should be taught in all schools. Parents shouldn’t be required to teach finances, when they themselves probably weren’t taught. In addition, there may be cultural or social issues that would be challenged by discussing money in general or just with females. I grew up thinking it was rude to talk about money. Even without these barriers, parents may be uninformed or new to the concepts of personal finance. 

We need to understand money so it won’t be used against us.

1. The mainstream use of credit cards began in the 1970s. People were attracted by the buy now, pay later mentality. The government had not protected the people until the financial crisis in 2008 and the government bail out. After having to bail out several financial institutions, the government implemented regulation in favor and protection of the consumer. 


2. The change in policy was too little too late. People lost their homes, families were displaced.


3. The government allowed banks to take advantage of the people’s lack of knowledge for many years. That’s why the people have been struggling with debt. 


4. Many senior citizens that are homeowners were tricked into reverse mortgages, not realizing that they were essentially short changing themselves and giving their homes away. 


5. The banks were unethical, and you may even know people that have lost their homes or filed for bankruptcy and had a major reversal of fortune. I know quite a few.


6. The younger we start actively saving, the better we will become at making good financial decisions.

Teen Research Unlimited studies show that Financial Literacy can help. High school students who received personal financial education are able to better manage their money because they have fewer maxed out credit cards, have higher savings, do more comparison shopping and pay debts on time. Those students will achieve significantly higher savings and net worth between age 30-49.
Looking at this information, just imagine what change we will see by starting that education and financial knowedge the elementary school level.
We can start at the 4th grade level up through college. The President’s Advisory Council on Financial Capability has outlined benchmarks for learning various financial topics by age. These should be taught in schools. 

• 6-10 years of age - Decide how to spend money, Compare prices before purchase, Learn of the risk of sharing information online, Learn that putting money in a savings account will protect it and pay interest.


• 11-13 years of age - Save at least a dime for every dollar, Risk of identity theft, Learn about compound interest and the advantage of starting to save early, Learn about the concept of credit cards, and its costs


• 14-18 years of age - Compare college costs when choosing where to enroll, Avoid using credit cards, unless you can afford to pay in full at end of month, Learn about credit scores, Calculate interest rates, Learn about income taxes and what to be earned from first job, Encouraged to set up a Roth IRA to save and invest money, Develop a personal budget


• 18+ years of age - Use credit only if you can pay off the bill in full each month, The need for health insurance, Emergency funds, important to save at least 3 months of expenses, Think about the risks and expenses of investing, Evaluate borrowing options, Computing state and local taxes, Recognize the basic principles of personal insurance policies

Implementation of this plan will improve the economic outlook of the people of New York and generations to come. It allows for a logical progression of complex principles that not only help with daily decision making, but will also serve as a solid foundation in finance topics that could result in deeper levels of understanding in economics and finance.

The State of New York should create state tax incentives for saving for immediate, short, and long-term goals. The State of New York should also create state tax incentives for creating retirement accounts for citizens under 21 years of age.
The ultimate long term goal in setting this plan to action is that Americans will take charge of their retirement funding efforts. One out of every six elderly Americans is already living below the federal poverty line, according to the U.S. Census Bureau. Based on a study done by the National Institute on Retirement Security, the average American at retirement age has $12,000 saved. Working age Americans have an average of $3,000 saved.

Practicality:
If financial literacy is achieved, then we will create change, and as a result:

• Dependent children will learn how to be financially independent


• The number of college students in debt will be reduced


• Our residents will improve their credit rating with improved record of timely payments and available credit.


• Fewer people will default on their loans, reducing the overall number of bankruptcies, settlements and foreclosures.


• The number of people in need of public assistance will be less as a result of implementation of saving and budgeting


• Retirement savings will increase, and reduce the number of seniors at risk of outliving their retirement


• We will break the cycle, and our future generations will achieve financial freedom with proper planning principles.

We cannot ignore that we are experiencing economic struggle today. We cannot pretend that we aren’t fearful about our own financial security. Something needs to change now. It’s not too late for us, our children and our grandchildren. Let’s end this vicious cycle. Please sign my petition to end financial illiteracy.