Money Smarts: Why Some Schools Make Kids Take Personal Finance

Money Smarts: Why Some Schools Make Kids Take Personal Finance

This spring, Oklahoma implemented the most difficult financial literacy requirements in the country. Its high school seniors had to prove they were knowledgeable about topics ranging from insurance and identity theft to retirement planning and taxes before they were allowed to graduate.

The state's efforts are admirable, considering the majority of young people show such little money know-how: When asked example-based questions about compound interest, inflation and mutual funds, only 27% of young adults got all three questions right, according to a paper by the National Longitudinal Survey of Youth.

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Unfortunately, ample research suggests that early financial education programs don't make a huge difference down the line. On average, students who completed a semester-long personal finance education course scored below average on a survey conducted by the Jump$tart Coalition for Personal Financial Literacy. Meanwhile, a Harvard Business School study found that state-mandated financial literacy classes did not affect graduates' later saving behavior.

So how can we make these programs more effective? One theory is to provide people with educational opportunities closer to the time that they would face financial decisions; for example, providing retirement planning workshops when they open a 401(k), or loan counseling when looking to borrow. The caveat is ensuring that the education is provided by an unbiased source, rather than a company looking for advertising opportunities.

Colleges, meanwhile, have begun to set up financial literacy programs—not in classrooms, but through their student health centers. The belief is that behavior change (arguably the ultimate goal of financial education) is difficult and something that might not be possible unless someone receives coaching in the same way they may need it for losing weight or eating better.

You don't have to go back to school to boost your own financial literacy. Take advantage of online resources, such as the LearnVest Knowledge Center, to kickstart your education!

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