Financial Education: A Job for Teachers or Parents?

The idea that teaching kids about money should be left to parents is strictly old school, a panel of experts agreed. Personal finance is "Reality" in the post financial crisis world and should be regarded as the Fourth R. This is an emerging core subject area in schools throughout the world.

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Teachers have enough to do. That’s what a lot of people say when it is suggested that we incorporate financial education into our school system. Let educators focus on the three Rs; leave lessons in personal finance to parents. After all, every family’s values and resources are different.

At first blush, this approach seems to make sense. Some researchers believe that kids who graduate from college tend to figure out personal finance anyway. Meanwhile, just one in five teachers feels qualified to teach kids about money. So let schools do what they do best: prepare students for higher education.

(MORE: Making Personal Finance Cool to Kids)

But the very suggestion that financial education has no place in our schools rankles financial literacy advocates and elicited groans from a recent panel diving into the issue. As moderator of the panel sponsored by accounting firm PwC and online educator Knowledge@Wharton High School, I was delighted to play devil’s advocate—and draw out a robust defense of teaching kids about money in school.

“The answer is no, this should not be left to parents,” said Annamaria Lusardi, economics professor at George Washington University. “We don’t ask parents to teach math and physics and history. Why would we ask them to teach financial literacy?”

Personal finance is emerging as a new core subject area for many schools. Policymakers around the world see it as a step toward avoiding the next economic meltdown, and advocates say learning about things like budgets and credit cards is no less important than reading, writing and arithmetic.

“If we leave it to the parents, we are accepting that we have an unequal society,” said Lusardi, who is regarded as a global leader in the financial literacy movement. Her research has shown that familiarity with financial concepts accounts for as much as 50% of the wealth gap between affluent and low-income families.

Other panelists weighed in with equal fervor. “We owe an education to our children in many different areas,” said Georgette Phillips, vice dean, undergraduate division at Wharton. “This is just one of them and we should not put it on a different standard than the other pillars of a well-rounded high school education.”

(MORE: The Stateless Statesman)

Financial education is a critical piece of what PwC looks for as it hires 4,000 young people each year, said Shannon Schuyler, PwC’s corporate responsibility leader. “They need to have some background in this area regardless of whether they are going into accounting, finance, IT or HR. This isn’t something that is just nice to have, and so we’ll leave it to parents. This fundamentally affects our marketplace and our economy.”

But you can’t leave the parents out, said panelist Brian Page, an award-winning economics teacher in Reading, Ohio. “Money is personal,” he said. “This can be threatening. You have to approach parents as partners.” When parents see what you are teaching they usually get on board, Page said, and by being engaged they often end up learning as much as their kids.

Everyone agreed the movement to teach kids about money isn’t progressing fast enough. By some measures it’s even stalled. But as Lusardi said, “it’s an essential topic” that should be taught in every school. I think of financial education as “Reality”—and call it the Fourth R. A growing number of educators think of it that way, too. But with only 14 states requiring that a course in personal finance even be offered in high school, we have a long way to go.

24 comments
finance
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Rab Beverly
Rab Beverly

I think credit card companies want this job.

Dan Gmyrek
Dan Gmyrek

35 yrs ago financial literacy was covered in Home Ec. Even as a guy I had to take that as part of the core sequence and it included things such as budgeting, keeping a checkbook, basics on house buying, etc.  Something like the Dave Ramsey course would be the modern equivalent, and probably should be part of a core "life skills" course

Lynne L Finch
Lynne L Finch

We continue to believe that teaching financial literacy in schools will save our kids from economic disaster. Yet, knowing about financial matters will not help our children learn to manage their own money. Financial literacy as taught in schools provides knowledge. But knowledge is not experience. 

Money management skill requires practice, something that cannot and does not happen in the classroom, simply because schools can’t provide real money in the classroom. Only parents can do that. To become competent in managing money a child has to practice with real money.

Compare financial literacy to getting a drivers license. Teens can’t wait to get out of the classroom and get their hands on the steering wheel. For a teen the learner’s permit is literally where the rubber meets the road. 

As with learning to drive a car there are two parts to financial education, knowledge and skill development. Parents can provide money management education at home by providing money, control of money decisions, and responsibility for more than just fun spending. This requires no financial expertise by parents but does provide a real-world experience in learning to manage money for day-to-day spending as well as making decisions and learning from the results. This is not a lesson that can be learned overnight when a teen becomes an adult legally responsible for all financial decisions. 

In a classroom, kids are not using their own personal money through allowances and chores. They are not keeping track of a day-to-day running balance as required in adult life. In my book, "The No-Cash Allowance," I recommend that kids manage their money as a number in an account kept with parents and that they not get paid in cash, receiving money as a deposit to their account. Using this approach kids also learn the principles of debit card transactions because it is possible for a parents to pay for the child's purchase in the store and the child subtract from the balance as one would do with a debit card. I believe these type of experiences, not available in the classroom, help prepare kids in a very practical way for adult money management. 

Lynne Finch, author, The No-Cash Allowance

alynnteacher
alynnteacher

Rarely anything learned in school is true

practice...application of knowledge is so abstract and distant from students’

classroom experience (such a shame…example: 

why do we need to know algebra anyway, when will I ever use this?).

 

I am a high school history teacher with a

business education certification as well. 

A few years ago, I had the pleasure of teaching an elective course that

was fundamentally a financial literacy course. 

In thirteen years of teaching, it was my most memorable teaching

experience.  I truly felt my instruction

made a great impact on students as they forge ahead making decisions for their

future.

 

Some of what we did:

-       reviewed

real credit reports so student understood what they look like, what to look for

on them, and how the information computes to FICO and other credit scores, used

that information to shop car and mortgage loans to see how people pay different

interest rates depending on their credit worthiness

-       determined

the cost of credit report monitoring services and the free services of

annualcreditreport.com

-       compared

credit card offers delivered through the mail (students brought in various

offers received from parents), used online calculators to determine the

interest costs of  carrying a balance

(ex. What if I pay only the minimum payment? 

Min + 100, etc.)

-       created

a reasonable budget for a fictional character each student developed given a

specific age, students created financial goals for the character, researched

housing and other costs within our school district, and made realistic plans

for achieving success based on career and reasonable salary expectations, also

compared standard of living differences around the country

-       visited

the offices of a financial advisor (large brokerage firm) and an independent

fee-only financial planner to interview each about their services and generate

criteria for selecting a financial service provider if they are seeking

professional guidance

-       spent

considerable time analyzing the causes of the housing crisis and resulting

recession

-       tons

more using Excel to create budgeting worksheets and analyze financial data to

make decisions

 

Sorry for the long comment.  I just wanted to share how thirsty students

were for financial knowledge.  My class

was made up of 11th and 12th graders and I know they will

remember what they learned (at least some of it) as they consider taking on

student loan debt, plan to buy their first car, and consider career options.

 

Every student deserves access to quality

financial literacy instruction and of course it should be offered in every

school.  Why is it any less important

than literature, art, history, etc.?

Leisaaa
Leisaaa

This is all well and good for affluent parents, but what about lower-income families that can't afford to give their kids allowance through chores? That is what this article is addressing - the wealth gap. Isn't at least some financial education in school better than the none at all they would get at home?

I went to public school in Illinois, and I was required to take an applied science class in high school that taught budgeting, balancing a check book, filing taxes, etc. in order to graduate. Sure it was all "imaginary" but the concepts were solid. We had one project where we needed to use the internet to find a house, car, and job and then budget all the payments including all taxes. It was great because it got us to think about how much things actually cost in the real world, and how much money you need to earn in order to afford what you want. Something as simple as that has a lasting impact.

alynnteacher
alynnteacher

Rarely anything learned in school is true

practice...application of knowledge is so abstract and distant from students’

classroom experience (such a shame…example: 

why do we need to know algebra anyway, when will I ever use this?).

 

I am a high school history teacher with a

business education certification as well. 

A few years ago, I had the pleasure of teaching an elective course that

was fundamentally a financial literacy course. 

In thirteen years of teaching, it was my most memorable teaching

experience.  I truly felt my instruction

made a great impact on students as they forge ahead making decisions for their

future.

 

Some of what we did:

-       reviewed

real credit reports so student understood what they look like, what to look for

on them, and how the information computes to FICO and other credit scores, used

that information to shop car and mortgage loans to see how people pay different

interest rates depending on their credit worthiness

-       determined

the cost of credit report monitoring services and the free services of

annualcreditreport.com

-       compared

credit card offers delivered through the mail (students brought in various

offers received from parents), used online calculators to determine the

interest costs of  carrying a balance

(ex. What if I pay only the minimum payment? 

Min + 100, etc.)

-       created

a reasonable budget for a fictional character each student developed given a

specific age, students created financial goals for the character, researched

housing and other costs within our school district, and made realistic plans

for achieving success based on career and reasonable salary expectations, also

compared standard of living differences around the country

-       visited

the offices of a financial advisor (large brokerage firm) and an independent

fee-only financial planner to interview each about their services and generate

criteria for selecting a financial service provider if they are seeking

professional guidance

-       spent

considerable time analyzing the causes of the housing crisis and resulting

recession

-       tons

more using Excel to create budgeting worksheets and analyze financial data to

make decisions

 

Sorry for the long comment.  I just wanted to share how thirsty students

were for financial knowledge.  My class

was made up of 11th and 12th graders and I know they will

remember what they learned (at least some of it) as they consider taking on

student loan debt, plan to buy their first car, and consider career options.

 

Every student deserves access to quality

financial literacy instruction and of course it should be offered in every

school.  Why is it any less important

than literature, art, history, etc.?

GKathy
GKathy

Thanks, Dan, for keeping this issue top of mind. 

YES Personal Finance should be taught in schools! It's in our national interest that our future workforce  is financially capable.  We learned from the economic crisis that it hurts all of us when too many people make poor financial choices.

It's not enough to make sure schools offer Personal Finance: we know that when it's offered as an elective, fewer than 2% of students take it. In other words, about 24 million young adults 17-30 have received NO formal instruction in Personal Finance.  VISA estimates that fewer than 25% of students have received any financial instruction even from their parents.Every student needs these skills, college-bound or not.And to Steve Bulls' point,  we should be teaching skills, not just concepts and values. Competency-based instruction; ie, skills practice and demonstration, is how the instruction should be delivered. Colleges and highschools use our program to enable students to practice in online simulations the tasks and decisions they have to master in real life, only faster and more vividly, and in a game. Players have to compare the promotional offers of 5 credit cards and choose the best one; identify all the gotchas in a Cardholder agreement; complete a 1040EZ, and create a Student Loan Repayment Plan (that they can tape to the bill drawer).Katherine GriffinMoneyU.com

FELA
FELA

It is interesting that this is being discussed as an “either-or” solution. There is no question that financial education has a place in our school systems, but I would argue that it also should be part of discussions around the dinner table at home as well. In fact, if there is one subject that might necessitate this two-pronged attack more than others, financial education is at the top of the list.

The importance of financial education cannot be underestimated. It is one subject that has practical application in our daily lives. It cuts across ages. And, our mastery – or lack of understanding – of this subject has meaningful implications on our daily financial decisions and long-term financial security.

However, whether at school or at home, one of the greatest challenges is that the instructors – parents and teachers - need to be adequately equipped.  This requires providing both training and resources to teach financial education. This speaks to the importance of ongoing professional development in schools for teachers. This also speaks to the need to reach parents in the workplace where they are making highly important decisions about their money, whether about their paycheck, benefits, or retirement plan.

The Maryland State Department of Education has developed a terrific model for professional development in financial education. Similarly, we continue to see increased interest in financial wellness programs for employees.

HighPoints Learning
HighPoints Learning

Unfortunately neither teachers nor parents are equipped to teach about finances.  The fact that we buy everything on credit and get beat up by the big banks is evidence of this.  Dave Ramsey has a great program for teaching about money that I would use on my kids.

FELA
FELA

Please see comment above.

Steve Bull
Steve Bull

Absolutely, students should be taught financial literacy. But which persepective? We certainly don't want them exposed to the current regime of neoclassical economists whose models use faulty assumptions (see Steve Keen's Debunking Economics). We also don't want them trained in 'status quo capitalism' as it related to impovershing the disadvantaged and enriching the wealthy. Perhaps Austrian economics can be the foundation of a new paradigm that challenges the status quo...

joanno
joanno

Understanding financial basics like the difference between compound and simple interest, the different types of investments that are out there and how they work, the different types of insurance out there and how they work, the basics of  personal budgeting, understanding how credit cards function, understanding how the myriad of bank fees affect one's bottom line:  the list of basic knowledge and financial skills that transcend the issue of 'perspective' is endless and worthy of serious attention in our schools.  For too many of our students, money is an abstraction, something they 'spend' via a credit card, where their bottom line is simply a number on a screen.  Without knowledge of the real world of money, they will easily be taken advantage of.

KSClifton
KSClifton

I agree with this 150% (no reflection on my mathematical abilities!).  I only WISH I'd been taught how easy it is to save for retirement when I wasn't only 20 years away from it. 

How simple to illustrate to children that the $300 leather jacket they just HAVE to have but can't afford to pay for will wind up costing  $800 if they're paying just the minimum...  (Or whatever it might cost over the years...) 

Learning to balance a checkbook, manage a budget, saving for their future by saving first, then investing.  There IS a right answer and wrong answer, and the wrong answer is waiting for retirement or looming retirement to being worrying about it. 

According to Marcus Emmanuel Barnes, "If you simply save $100 per month and invest this money in an investment that gives a yearly rate of return of 10% (compounded monthly) for 45 years (i.e., from age 20 years to the typical North American retirement age of 65), you will retire with over a million dollars in savings/investments." (http://www.marcusebarnes.com/3...

Don't you think EVERY child should learn this as early as possible???

Gary Johnston
Gary Johnston

As a math teacher of middle schoolers, I developed our unit on "percents" into "money matters" with a number of money management activities related to our learning benchmarks. Kids pick stocks, manage their allowance, calculate compound interest of CD's and Money Market accounts and develop a product which they sell to the student body to learn about entrepreneurialism.

 

Being seventh graders, I wonder how much will actually "stick" with them as they don't have any assets to actually invest. My hope is when they get older, they will remember the things they have learned when they were younger.

Financial education can be taught by either parent or teacher, as long as they're willing to share that wisdom.

Reythia
Reythia

Exactly.  Math teachers could teach an awful lot of the basics of finances during arithmetic training.  Use them as USEFUL word problems.  How many 5th graders can calculate a tip based on a restaurant bill?  How many can figure out how much credit card debt interest they will have to pay?  How many can balance a budget, given a known salary, car and house payments, and the need to buy groceries?  All of these basic math problems can be taught by middle school -- and they SHOULD be.  You don't have to explicitly teach finances, even, if you design the problems/projects cleverly.  Most kids will pick up the finance lessons on their own.

bobqoq
bobqoq

I think an important factor to consider is at what grade levels you start teaching about interest and repayments. The math for most kids *could* be taught by middle school, but how much do you expect  them to care about enough to retain? When I was that age the furthest thing from my mind was calculating tips, figuring out interest and balancing budgets. Counting out change for the latest Mad magazine was about as complex as it got when I was that age!

Lynne L Finch
Lynne L Finch

We continue to believe that teaching financial literacy in schools will save our kids from economic disaster. Yet, knowing about financial matters will not help our children learn to manage their own money. Financial literacy as taught in schools provides knowledge. But knowledge is not experience. 

Money management skill requires practice, something that cannot and does not happen in the classroom, simply because schools can’t provide real money in the classroom. Only parents can do that. To become competent in managing money a child has to practice with real money.

Compare financial literacy to getting a drivers license. Teens can’t wait to get out of the classroom and get their hands on the steering wheel. For a teen the learner’s permit is literally where the rubber meets the road. 

As with learning to drive a car there are two parts to financial education, knowledge and skill development. Parents can provide money management education at home by providing money, control of money decisions, and responsibility for more than just fun spending. This requires no financial expertise by parents but does provide a real-world experience in learning to manage money for day-to-day spending as well as making decisions and learning from the results. This is not a lesson that can be learned overnight when a teen becomes an adult legally responsible for all financial decisions. 

In a classroom, kids are not using their own personal money through allowances and chores. They are not keeping track of a day-to-day running balance as required in adult life. In my book, "The No-Cash Allowance," I recommend that kids manage their money as a number in an account kept with parents and that they not get paid in cash, receiving money as a deposit to their account. Using this approach kids also learn the principles of debit card transactions because it is possible for a parents to pay for the child's purchase in the store and the child subtract from the balance as one would do with a debit card. I believe these type of experiences, not available in the classroom, help prepare kids in a very practical way for adult money management. 

Lynne Finch - www.TheNoCashAllowance.com