In coming weeks and months, a new set of standards for financial literacy will cross the desks of educators across the country. The hope is that schools will embrace these guideposts and begin to wedge money lessons into students’ daily activities.
The Council for Economic Education, a nonprofit promoting financial education, developed the new standards at the request of and with input from educators at all levels. “We have a specific plan to go state by state and get these implemented,” says Nan Morrison, CEO of the council.
The new standards, to be formally unveiled next month, establish clear benchmarks for what kids should know by the end of grades 4, 8, and 12. They are broken into six personal finance categories:
- Earning income This includes collecting rent, stock dividends and interest on bonds. It also includes a discussion of the labor market and how education may lead to higher wages.
- Buying goods and services This includes planning, comparing, budgeting and making choices.
- Saving This includes near- and long-term goals and how time, interest rates and inflation affect savings.
- Using credit This includes borrowing options and how credit history helps determine availability of credit and the rate of interest that you pay.
- Investing This includes risk, rates of return and diversification.
- Protecting and insuring This includes potential loss of health, assets, income and identity, and how behavior affects the cost of insurance.
The council’s new standards are clear and concise. In the section on saving, for example, the standards state that by the end of 4th grade a student should know that “income is saved, spent on goods and services, or used to pay taxes,” and that students can use this knowledge to “explain the differences between saving and spending and give examples of each.” By the end of high school they should be able to “identify instances in their lives where they decided to buy something immediately and then wish they had instead saved the money for future purposes.”
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The standards emphasize developing critical thinking skills as opposed to memorizing rules of thumb. The idea is to teach kids how and why to save—not that they should save 10% of everything they make. “Financial literacy should be treated as a discipline, not a set of rules to follow,” Morrison says. As the Council explains in its marketing materials: “A systematic approach to decision making acquired in economics permeates virtually all aspects of life.”
The Council’s new standards build on a growing database of age-appropriate guideposts, which includes the Treasury Department’s Money As You Grow website. The Council’s standards augment those established by the JumpStart Coalition for Personal Financial Literacy and the federal government’s effort to infuse personal financial education into the national common core standards for Math and English.
Increasingly, it appears that common sense money lessons will become a part of every student’s education, most likely embedded in courses they already take. After all, how tough can it be to spend a day or even a week talking about debt when discussing the Charles Dickens novel David Copperfield, where a central character (Wilkins Micawber) gets sent to debtors prison?
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The challenge is getting teachers to buy in. They often lack confidence to teach this material. Let’s hope the new national standards for financial literacy in conjunction with efforts like JumpStart’s and the federal government’s common core initiative gives them the tools they need to get over that hurdle.