Just in time for Financial Literacy Month (celebrated in April since 2003), Gov. Ron DeSantis signed SB1054 into law requiring all Florida high school students to take a one-half-credit course in personal financial literacy and money management as part of their requirement to be awarded a standard high school diploma.
This step toward improving the financial literacy of future generations is an occasion to celebrate. We can also laud the rarity that this was agreed upon by all political sides; the bill passed unanimously through both the Florida House of Representatives and the Florida Senate.
Before we rejoice in this as a victory, let’s first discuss why it is needed. It’s easy to think “of course this is beneficial, so why not?” However, by adding a course to the required high school curriculum, something else must be sacrificed. So, there needs to be a compelling case as to why this is advantageous to justify its inclusion.
The US Financial Literacy and Education Commission defines financial literacy as “the skills, knowledge, and tools that equip people to make individual financial decisions and actions to attain their goals.”
If everyone acquired these skills/knowledge/tools outside of the education system, then there wouldn’t be a need to add them to the required curriculum. Unfortunately, the data indicates that this is not the case. For example, a study by CareerBuilder found that 78% of workers live paycheck-to-paycheck. Similarly, JP Morgan Chase found that about two out of three households do not have an emergency fund that would allow them to overcome six weeks without income.
Potentially even more concerning is the high instance of credit-card debt, particularly that which is rolled over month-to-month with exorbitant interest rates. A study by Inside 1031 found that over half of Americans carry credit card balances month to month and nearly half state that they depend on credit cards to pay for necessary living expenses. The high-interest rates (often exceeding 20% annually) can create a vicious cycle that is difficult for consumers to escape from.
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Having established the need, let’s consider whether adding this course to the high school curriculum is a good way to address the financial literacy issues at hand. In my opinion, this question comes down to two components: 1) does financial literacy education improve personal finance outcomes? and 2) is high school an appropriate age for this education to take place?
With regards to whether financial education works, and to what degree, there are conflicting findings. However, Financial Industry Regulatory Authority (FINRA) found significant improvements in saving rates and other positive personal finance indicators for individuals that have had at least ten hours of financial education.
Does that mean it will improve the financial outcomes for all individuals? The answer is assuredly no. Even with education, not all individuals will apply the lessons to achieve financial freedom and attain their goals. The most likely outcome is that there will be a positive impact on a large subset of future generations across demographics and socioeconomic backgrounds. This is a win, even if a fraction of high schoolers acquire the basic knowledge and put it into practice.
Is high school a good time for young adults to be learning about personal finance? Whether students go to college, begin a career, or choose a different path following high school, they are about to be bombarded with financial decisions, some of which could affect their financial solvency for many years to come. For probably the first time in their lives they will have more freedom to make their own choices about how they spend their money… and credit card companies will not be shy in targeting them and enticing them to begin using credit and accumulating debt.
The fact is it’s never too early or too late to improve financial literacy. Even though my son is only 5 years old, I have begun teaching him the value of a dollar and helping him develop good spending and saving habits appropriate for his age. For those who are beyond high school and won’t have the benefit of a required class, there are vast resources available (books, websites, online courses, podcasts, apps, etc.) to assist us all in continually improving our personal finance decisions . Our relationship with money is a lifelong journey.
So, Happy Financial Literacy Month to us all!
Brian Walkup is an associate professor of finance at the Crummer Graduate School of Business at Rollins College.