Why High School Kids Are Financially Illiterate
Business + Economy

Why High School Kids Are Financially Illiterate

If the U.S. education system can’t teach Johnny how to read, it’s not surprising it can’t teach him how to balance his checkbook or calculate compound interest.

A report out this month from the Champlain College Center for Financial Literacy (CFL) in Vermont finds that the vast majority of states are doing a poor or mediocre job of educating high school students in key financial skills. The report card, which awarded each state a letter grade, gave 60 percent of the states a C or less; 44 percent of those received D or F grades. 

John Pelletier, director of the CFL and author of the 2013 National Report Card on State Efforts to Improve Financial Literacy in High Schools,  argues that to make programs successful at the high school level, “financial literacy topics must be taught in a course that students are required to take as a graduation requirement.” 

The other essential ingredients for success are increased teacher training, funding to ensure that classes are offered to all high school students, and standardized assessments that insure that training is working.

In the aftermath of the 2008 banking and real estate crises, experts say financial education is critical to helping young adults better handle everything from credit card debt to student loans, and to make more complex choices about investing and mortgages. Since there’s no national curriculum standard for teaching financial literacy, questions remain about who should teach the classes and even whether funding should come from public or private sources.  As a result, the quality of financial education varies wildly from state to state and from district to district.

A-rated states like Virginia, Utah, Tennessee and Missouri are the only ones in the report that require a one-semester stand-alone class in personal finance as a graduation requirement. Tennessee, Georgia and Idaho (the latter two also received As) require students to be assessed on their knowledge of financial topics.


Alabama, Arkansas, California, Connecticut, Delaware, Hawaii, Massachusetts, Nebraska, Rhode Island and Washington, on the other hand, all received failing grades because they have few or no requirements for personal-finance education in high school.

For some schools, financial literacy is just not a top priority. “If your [students] can’t read, or you’re struggling with gang problems [in your neighborhoods], financial literacy is fairly low on the list,” says Carol Roth, a former investment banker and the author of The Entrepreneur Equation.

So how does financial education fight its way in, when every subject in cash-strapped school districts is competing for its own piece of the dwindling budget pie?

Not easily, according to Todd Harrison, founder and CEO of Minyanville, a New York-based financial education and media website. Harrison’s company has developed a financial literacy curriculum that has failed to gain entry into public schools. He blames a “labyrinth of politics in the school systems” that are hesitant to experiment with alternative teaching methods and that undervalue financial education.

“A financial framework is entirely more important then just an elective program,” he says. “It should be mandatory.”


Billy Hensley, director of education for the National Endowment for Financial Education, a non-profit group based in Denver, believes there is reason to be optimistic about the future of financial education.  He points to states like Colorado (which received a B grade in the CFL report) that have improved financial education by integrating personal finance into economics and mathematics classes.

Both Hensley and Pelletier agree that “embedding” fiscal literacy into other core classes can be an effective way to teach the material. They also agree that many instructors feel uncomfortable teaching financial.  A 2010 University of Wisconsin survey http://www.fdic.gov/about/comein/Mar3.pdf funded by NEFE found that less than 20 percent of K-12 educators believed they were “very competent” to teach a class in personal finance areas including credit and debt and savings and investing. 

Benjamin Harris, a senior research associate at the Urban Institute, is skeptical that financial knowledge leads to more responsible adult behavior and says that studies have been inclusive. He suggests that targeted seminars and counseling sessions on student loans and credit cards are most effective when the students are about to make decisions that involve acquiring credits cards and financing their own higher education. 

Another issue that concerns some experts is that classes on financial literacy will have little impact if parents have no insight into their own behavior with money.


“If the home environment doesn’t reinforce it, there’s only so much that can be done in the classroom,” Roth says. “It doesn’t matter what the teacher tells [the students] f they’re going to live entirely differently.”

Roth supports community literacy programs that can target the entire family, so that parents and children can share ideas and include financial learning in their daily lives.

The CFL report suggests that schools should establish partnerships with corporations if they can’t get government funding.  The national accounting firm PwC and Discover Financial Services both support financial literacy programs in public schools. 

But Pelletier warns that while financiers may be good sources of cash, they may not be good instructors.  “Just because someone is a financial professional doesn’t mean he’s a great teacher,” he says. “Someone from Schwab or Morgan Stanley almost always talks about investing in bonds and equities, but not about [basics like] savings and budgeting.”