Speaking to a White House advisory group this week, Secretary of Education Arne Duncan highlighted the need for schools to begin teaching students about personal finance as early as kindergarten. He’s dead on. But what’s he doing about it?
Not enough, that’s for sure. Surveys routinely show that most kids enter adulthood with little knowledge of budgets, credit, late fees and bank fees, to say nothing of things like compound growth and accrued interest on deferred student loans. Many end up in a financial jam before they’ve had their first full-time job.
This has broad implications for the economy. Young adults mired in financial problems are less productive so they don’t get ahead; they end up paying interest on debts when they could be paying for cars and furniture and other things that help the economy grow. Worst of all, they fail to take advantage of savings tools like a 401(k) plan, or mismanage what they do save, and will struggle when it comes time to retire.
This cannot be allowed to continue. Kids today will grow up in an unprecedented era of personal financial responsibility. The safety nets have been taken away. They must leave school equipped to make sound financial decisions from 18 to 80. One way to help them is by teaching about money in grades K-12. Duncan said as much in his comments to the President’s Advisory Council on Financial Capability:
“As important as reading and math and social studies and science are, I think today more than ever financial literacy has to be part of that. To continue to have a population that is relatively illiterate in these matters, I think has real negative consequences to our democracy. … This is not a place where we just need to get a little better. We’ve got to get a lot better, and we’ve got to get better faster. … You have to start young. … There are some problems where I think we’re pretty close to solving them, we just need to tinker, and this is not one of those. We have to get so much better. … We have a state of crisis here. We have an emergency, and I feel this tremendous sense of urgency.”
Those are strong words from a person in position to lead on this issue. So we might well ask, What is being done at the federal level to make financial education a core part of the public school curricula? We have any number of commissions studying the issues and problems and trying to determine what works best in the classroom. We have a national strategy for financial education that depends on voluntary participation. And there is a significant amount of cheerleading.
But what we don’t have is a federal mandate to require teaching this subject. In a sense, we have an anti-mandate. The feds have punted on the issue, saying they have no interest in trying to seize control of what is rightly the jurisdiction of individual states and communities.
That’s not how they are approaching the crisis in countries like Australia and New Zealand, which are swiftly moving toward a centralized public school financial education program. Australia is using federal resources to train teachers so that they actually have what it takes to teach kids about money.
The need is great and, as Duncan concedes, we could be doing a lot more. So why aren’t we?