Should Schools Teach More About Personal Finance?
By Geoff on Sep 18, 2008 in Saving & Investing
Becoming financially literate is not a fundamental education principle in the United States. Maybe it should be.
We heard about an 18-year-old consumer who quickly accumulated debt on his first two credit cards. Then, he bought a car he couldn’t afford. This general pattern of irresponsible spending and lack of saving did not stop until he was 30.
Now, at age 33, our consumer friend wonders about his lack of financial knowledge. An interesting question comes to mind: should schools offer as many class hours on personal finance as they do on physical education?
Ed Friedman, a senior economist with Moody’s Economy.com, an independent research group, seems to think so. “Makes total sense, of course,” he says. “In the U.S., there’s an endemic of Americans who get maxed out and fall into financial problems.”
While many of us never fall into financial distress, you could very well be headed directly for it. After all, we have grown up in a society that worships big car loans and credit cards.
You can probably relate. Consider these facts, as reported by MSNBC:
About 43 percent of American families spend more than they earn each year.
Personal bankruptcies have doubled in the past decade.
The average household owes $18,654 in consumer debt, up more than 41 percent from a decade ago.
Money problems cause marital, physical and emotional health problems, too. Unwise borrowing has led to a housing crisis.
“If people had just been better educated,” Friedman said. “We’re going to see 3 million defaults on home mortgages this year, double, maybe even triple, average rates.”
Why don’t schools place more emphasis on personal finance?
U.S. consumer debt is growing exponentially, and many fear that Social Security won’t be around for long. Meanwhile, our national debt is leaving the country shaky in the world’s economy.
Tomorrow’s savers, spenders, borrowers and decision makers are in today’s classrooms.
An economist and educator recently observed that local schools offer some classes that cover minimal personal finance, but sparse resources keep the subject from being taught like math and science are.
In part, it’s because of space in the curriculum. Schools offer what they are required to offer, obviously, but there are many other things – fitness testing, for example – that take kids out of the classroom.
Local high school juniors and seniors receive some finance education through a program that teaches skills ranging from balancing a checkbook to writing a resume.
But schools lack focused, sustained education on money discipline and behavior.
It’s an unfortunate fact. Schools give us the skills to earn money, but little in the way of the knowledge needed to keep that money.
The U.S. savings rate has been flat, near zero in the last decade. In China, that rate is 41 percent. That’s why they’re lending us so much money. If students were taught personal finance, you’d have fewer defaults and bankruptcies. This all sustains growth in the economy.
If you enjoyed this post, you may wish to:
