A global consensus is forming around how to teach kids about money in school. The answer: Embed personal finance lessons in the courses they already take.
That’s the approach in the U.K., which this month elected to make financial literacy lessons mandatory throughout its school system in 2014. Concepts like budgeting and compound interest will be explored in math classes as well a new “citizenship” course. Perhaps a dozen other countries in Europe and Asia embrace this approach as well.
Now the U.S. is hopping on board. In the next couple months, the Treasury Department will go live with a website likely to be found at moneyasyoulearn.org. This site will offer teachers ready-made personal finance lessons that fit neatly into existing math and English courses. In time, the website will expand to include personal finance lessons suitable for social studies, history, and science classes too.
The effort aligns with the Common Core Standards initiative that 46 states and the District of Columbia have agreed to follow, starting in 2014. These new standards establish minimum knowledge guidelines, by grade, so that a child moving from one state to another gets a consistent education. The idea behind the money-as-you-learn project is that teachers who must now refashion their lessons to be in concert with the Common Core will have resources to seamlessly infuse personal finance instruction.
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This is a big step. Education in the U.S. is controlled at the state level. The Federal government cannot dictate standards. The Common Core Standards, which for now apply only to math and English, address the need for uniformity. The federal government is seizing this moment to promote financial education.
“This was the moment to act,” says Amy Rosen, CEO of the nonprofit Network for Teaching Entrepreneurship and a vice chair of the President’s Advisory Council on Financial Capability. “We have an historic opportunity to fast-track personal finance knowledge in this country.”
The new website and the push to embed money lessons into existing courses was a central part of the Council’s final report on financial literacy, which was presented to President Obama Feb. 19. “This was not a perfunctory discussion,” Rosen says. “I am excited about the President’s personal commitment to financial education.”
The coming money-as-you-learn website complements another online tool that the Council unveiled last year: moneyasyougrow.org, which describes what kids should know about money at various ages. I first reported on that website a year ago. With little publicity it has had 600,000 visitors. Rosen envisions both websites eventually being housed at an organization still to be identified, but which is better set up to promote the sites.
Brian Page, an Ohio school teacher serving on the working committee that is gathering content for the new website, says he believes teachers will embrace the tool. “This project brings practical financial knowledge aligned with common core into our classrooms with turnkey resources,” he says. “The resources are relevant and matter to many students now.”
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Much of the content on moneyasyoulearn.org will be plucked from existing websites, texts, news reports, and research. It will be straightforward and practical information plainly presented in an age-appropriate manner. But some of the content is being specially written around the “11 big ideas” that drive the personal finance effort, says Julie Heath, director of the Economics Center at University of Cincinnati and a Council working committee chair.
The guiding concepts:
- Compound interest, which leads to discussion of saving,
- Opportunity cost, which leads to smart decision making,
- Value of education, which leads to wise choices about finding a college and paying for it,
- Risk, which leads to discussion of diversification and insurance,
- What money is, which leads to understanding what it can and cannot buy,
- Time value of money, which leads to more informed purchasing, investing and planning,
- Cost/benefit analysis, which leads to better decision making,
- Setting Goals, which leads to desired outcomes,
- Delayed gratification, which leads to the ability to consume more in the future,
- Scarcity, which leads to acknowledging limitations and making choices,
- Inflation, which leads to discussion of how to mitigate its effects on saving and investment.
“People’s concept of financial literacy is very narrow,” Heath says. “They think it is all about balancing a checkbook and making a budget.” But widely applicable concepts underpin smart money management. “It’s an approach to life, and it shows up everywhere,” Heath says. “These big ideas are designed to lead to deeper understanding and changed behavior.”
Embedded personal finance is not meant to discourage stand-alone and elective money courses, Rosen says. But the reality is that few school districts offer a stand-alone course in personal finance and only four states require one. Plugging such lessons into the Common Core may be the closest we come to a broad requirement that kids learn something about money before they get their own credit card or cell phone, or sign up for student loans.