A Big Push for Mandatory Personal Finance Classes in School

in a new paper, the highly influential Consumer Financial Protection Bureau endorses mandatory personal finance classes in grades K-12.

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With nations like Australia and the U.K. having voted to make financial education mandatory in their school systems, the U.S. is moving aggressively to re-assert leadership on this important front in the global fight against financial illiteracy.

Last week, the U.S. Consumer Financial Protection Bureau unveiled Transforming the Financial Lives of a Generation of Young Americans, a white paper with specific recommendations for advancing financial education in grades K-12. Meanwhile, the Treasury Department has just gone live with moneyasyoulearn.org, a website offering teachers ready-made personal finance lessons that fit neatly into existing math and English courses.

Schools in the U.S. are governed at the state level. It is unlikely we’ll ever have a federal mandate for K-12 financial education like that in the U.K. or Australia. But most states have agreed to a common core initiative that dictates certain educational standards across state lines and which will be in force next year. Treasury’s new website will help teachers build personal finance lessons into courses they must redesign anyway.

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The bigger development, though, is the CFPB officially weighing in. This is a powerful federal watchdog that sprang from the financial crisis. Its wide-ranging mission is to protect the financial interests of individuals. Since inception, the CFPB has been focused on things like simplified financial statements and mortgages. Now turning to kids and money, the agency’s thoughts will carry a lot of weight.

“Young people today and future generations should not have to repeat the financial mistakes made by earlier generations,” director Richard Cordray writes in the paper. “This is why the CFPB is supporting a plan to bring financial education into K-12 classrooms.”

The agency’s five recommendations:

  • Introduce key financial concepts as early as kindergarten and require a stand-alone personal finance course for graduation from high school.
  • Include personal finance questions in standardized tests.
  • Provide practical, hands-on learning opportunities as they relate to personal money management.
  • Offer teachers incentives and training to lead a personal finance class.
  • Provide parents with the tools to discuss money topics with their kids at home.

These are important steps in raising a more financially confident next generation, and they correctly identify our biggest obstacles.

Just four states currently require a stand-alone course in personal finance. Unless this subject matter is tested it will never be taught. Research shows that games and practical money choices are most effective with financial lessons. In surveys, just one in five teachers say they feel comfortable teaching about money. And of course, parents are hands-down the most influential adults in any child’s life.

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The CFPB is a welcome new and influential voice in the debate over whether and how to teach kids about money at school. As the agency concludes in its white paper:

“Young people are not prepared to manage their finances when they reach adulthood. At the same time, the current financial services marketplace is increasingly complex. In the face of this very real need, American education should include approaches to teach young people about their finances. Part of that task starts at home. But young people spend the majority of their time in school. Therefore, it makes sense to offer financial education early and consistently throughout the K-12 school years.”