Financial Literacy in Schools
by Grace Zhang
In this post, we address financial literacy education in schools and the reasons behind its unavailability. We interviewed parents, teachers, and education providers to get their opinion on the issues with financial education in schools. As always, we will also discuss tips on how to support financial literacy education at home.
Do children receive financial literacy education?
The phrase “financial literacy” is thrown around a lot. For many adults, it means managing finances, keeping track of credit lines, and working to achieve financial stability in a steady and smart way. Unfortunately, many of us struggle with those tasks.
A 2011 study entitled Americans’ Financial Capability painted “a troubling picture of the state of financial capability in the United States. ... The majority of Americans do not plan for predictable events such as retirement or children’s college education. Most importantly, people do not make provisions for unexpected events and emergencies, leaving themselves and the economy exposed to shocks.” The picture is as dim for Canadians. A 2018 survey conducted for insolvency firm MNP Ltd. found that 31 percent of Canadians say they don’t make enough to cover their bills and debt payments, and a staggering 46% are $200 away from insolvency every month.
Two of the factors contributing to low financial well-being are financial knowledge and economic behavior. And while both can be developed with proper practice and education, it cannot be done overnight. Habits such as routine budgeting, saving before spending, delaying gratification, and so on take time to develop.
This is why it is so important for our children to be exposed to and involved in various financial processes from an early age. Teaching your children these lessons early on will not only give them an upper hand in their future but will be an invaluable experience that will benefit them in the long run.
Unfortunately, the lack of focus on financial literacy when it comes to children is widespread. Even though it has become absolutely necessary for students to understand the reasons behind good monetary decisions and to learn the ways to come to these conclusions, very little resources, from both parents and schools alike, are spent on these efforts.
Just like mathematics, science, and writing, finance is something that must be taught. However, in our present day, more and more children are being thrust into a world that is run by finance, while knowing nothing about it. In the future, when our children are incurring unnecessary debt, failing to budget, and being unable to understand their financial decisions, it will be a consequence that is completely on our shoulders.
While parents are increasingly concerned about this topic, schools seem to be unable to catch up. Financial literacy is rarely ever presented in schools, especially in the formative years. In elementary and middle schools, the sole focus on academics leaves no room—and no funding—for teachers and faculty to make sure that our children are financially literate.
Why do we need financial literacy to be taught in schools?
When asked about financial literacy concepts, Lea, a fifth-grader, responded, “What does financial literacy mean?”. We interviewed her and her mother, Miglena, to talk about their perspective on financial literacy in schools. After breaking it down to simpler terms, Miglena said that Lea really only knew about two things: different denominations and that the government budgets their money.
Miglena mentioned that while their local school district was starting to roll out a financial literacy curriculum, they hadn't seen any of it yet. Nothing remotely related was being taught. Miglena is worried; “As a parent, I do not have the time or the knowledge to create an entire curriculum for my children, even though financial education is very important.”
Just like many parents, she looks to schools and teachers to teach the basics, a foundation she builds on when her daughter returns home. This is the biggest obstacle she and her children face. “Without a foundation from teachers at school, I have nowhere to continue the conversation from.”, says Miglena. All she has is her own limited experience, which is nowhere near a professional’s perspective or the learning that can come from formal lessons. Miglena believes that the teachers are not ready; they have not been given enough resources to support financial literacy education.
This lack of preparedness for financial literacy education is evident in schools. Over 70% of K-12 teachers are willing to participate in formal financial education training, indicating that they feel least prepared to teach on risk management and insurance, saving and investment, financial responsibility and decision making, and credit and debt.
Even though many districts like Miglena’s have approved financial literacy initiatives, they have not done enough to empower teachers to actually teach these concepts. Without the right curriculum and proper support, teachers, students, and parents are left empty-handed.
Like their parents, children show interest in learning about finance, even if they are not necessarily sure what it means. When asked, Lea was full of ideas about different ways schools could help her learn about money and finance. , She mentioned that students like her would enjoy activities and presentations involving interactive slideshows and moving graphics,
With interest present from both students and their families, it would make sense for school districts and government mandates to focus on financial literacy resources. Unfortunately, the interest from parents and students alike has not immediately translated to funding and resources dedicated to teachers and schools. Resources and funding for financial literacy are constantly behind the demand that has arisen.
Why don't schools teach financial literacy?
“Financial illiteracy is a global issue”, comments Alex Mazloom, co-founder and director of MindTreasures, one of the rare non-profits that are working to bring financial literacy education into our schools. Underfunded, underpaid, and overworked, school faculty do not have the resources—or the energy—to teach our children these fundamental concepts. That’s where his organization comes in; they visit schools during class and in afterschool programs to help them grasp the moral, behavioral, and practical concepts of finance. However, the fact that outside nonprofits have to come in to fill the gaps in our education systems is a symptom of a much graver problem.
89% of K-12 teachers believe that, to graduate high school, students should take a financial education course and pass a test to show competency in the subject. Theoretically, this makes sense; if students cannot show they are ready to be financially independent, how can they safely transition into adulthood, where financial decisions are to be made completely on their own? However, this expectation does not match our reality; barely any financial literacy classes are being offered in high schools, not to mention the absolute lack of course material and resources in middle schools and elementary schools.
Even though faculty and parents alike agree on the importance of financial literacy education, government policies, federal funding, and curriculum adoption are lagging behind. “I think there is a lack of ready-made curriculum that is easy for teachers to access that aligns with state standards so teachers can “justify” the time spent in class.”, notes Katherine, a California elementary school teacher.
To support our children, we need to give their teachers the resources, education, and training to do so.
However, there is a light at the end of the tunnel. Financial literacy is being taken more seriously and bit by bit, teachers across the board are trying to integrate it into their classrooms.
MindTreasures’ success in schools is an example of that. In the beginning, Alex only taught his financial literacy curriculum in an after-school program to a couple of students. Now, he is working with more and more schools, teaching in classrooms to their entire class. As he teaches, students are enthralled by having a guest, a new face, and teachers watch, taking in his curriculum and learning how to do lessons on their own.
Alex has worked with some schools for over a decade, showcasing the longevity of his program and is proof of the positive reception from parents and faculty alike.
The next step? Training our teachers to work with the curriculum on their own, without MindTreasures' help. Alex says that progress is slow, but teachers are beginning to adapt. One such teacher is Katherine, who works at an elementary school. While she hasn’t taught the curriculum completely on her own yet, Alex says that she has been able to lead individual lessons, a good sign going into the future.
The program involves parents' participation as well; it comes with worksheets and handouts that help get the conversation started at home. Alex mentions, “Parents’ participation in financial literacy education is important. We can see students whose parents are highly involved do so much better in our courses.”
Still, efforts alone from driven teachers like Katherine and non-profits like MindTreasures will not be enough. Parents and communities must band together and advocate for financial literacy education. Make plans to attend school board and district meetings to ask for funding and support for more detailed financial literacy programs in your schools. Prepare presentations and posts that stress to other parents in your area the importance of financially literate youth. We all have a part in helping our children become more financially literate--and it’s not just at school.
How should we talk about financial literacy at home?
Although our schools have a long way to go to establish financial literacy as a part of the curriculum, parents can make up much of the gap by making the conscious decision to expose and explain various financial concepts to their children.
First, determine why financial literacy is both important to you and important for your child to learn. Establishing a purpose will make the extra effort, difficult conversations, and learning curve just that much more worth it. Then, at any age, start introducing these topics to your children; it is pertinent that you begin as early as possible. You can begin the conversation either with small activities, like the Marshmallow Test to explain delayed gratification, or more involved projects, like monthly budgeting.
While financial literacy education is not sufficiently supported by the schools, one would expect that banks will be more involved in it. When opening a bank account, especially for children, one would expect a welcome video, an introductory pamphlet, or some kind of financial literacy resource. However, when Tracy, a mother of two, opened bank accounts for her children, they were met with nothing.
The lack of support that parents face when trying to teach financial literacy concepts is daunting, but it should not discourage anyone from trying. Tracy said that she “hopes [her] children will have a more comfortable life because they are capable of managing their money with the proper education”. She incorporates financial literacy into various parts of her life and with that, teaches large moral concepts.
Tracy told us that “gratitude and respect are integral parts of [her] education” and that she “wants her children to appreciate the things that they have.” However, Tracy makes clear that exposure to finance is not enough; parents need to sit down and take the time to explain processes to their children.
Complex conversations can be made entertaining and engaging by presenting them as fun activities or opening virtual bank accounts with applications like Pennygem.
The next time you walk into a toy store, give your child $20. After they, inevitably, go pick up a new favorite toy, take a minute in the aisle to explain that if they put their selection back, they will have $40 to spend on a larger toy the next time you come and visit.
Delaying gratification to save for larger goals is also a key lesson Tracy tries to teach her children. By encouraging her children to ask family members to contribute to larger purchases rather than small gifts, she teaches her children the power of combining finances to purchase more meaningful and valuable items and experiences.
To help with different financial concepts, such as securities and investments, taxes, various incentivized savings accounts, etc., video presentations can help younger children stay engaged and grasp these difficult concepts. Working these ideas into everyday conversation and encouraging independent exploration is key to ensuring that, by the time they are adults, your children will be financially literate.
While older children also benefit from educational videos, doing more involved activities, such as working on a mock budget, opening a banking account, and having complex goals will help them get more hands-on experience under your guidance.
Another idea is to implement a constant rewards system in your home. It doesn’t have to be monetary; it just has to reinforce the idea that good actions, especially hard work, are rewarded in some way.
The most common rewards system is an allowance system but there are many alternatives. One such alternative is rewarding children for completing tasks or doing something good. Children can collect the rewards for the things they want to get. This could be something as simple as a trip to the park or buying their dream bike. Parents can make use of the chore apps like Pennygem to easily track the rewards and engage children.
Of course, these are only a couple of ideas out of the countless available to implement financial literacy in a fun and engaging way in your home. Pennygem is a great app that combines many different aspects--mock banking, virtual savings, educational videos-- into one. It allows full control and transparency when you are facing the daunting task of ensuring your children will be financially literate. Even though financial literacy is lacking in today’s world, you can give your child an upper hand by starting these lessons now—by being financially literate, your child will be prepared to take tomorrow’s world head-on.