“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds naught and six, result misery” said Wilkins Micawber, a character in Charles Dickens’ David Copperfield. In a theatrical way, he meant to show the value of conservative personal finance and the woes of deficits.
Economic and financial education should be taught and tested by every state in the Union. In order for this to happen, we need sweeping legislation passed at the federal level for minimum standards of financial and economic education for a high school diploma. To adequately deal with financial challenges of the present and future and to understand and amply react to the vicissitudes of economic climate, economic and financial education must be implemented in our primary schools. As the beneficiary of one of the pilot programs for financial and economic education in Virginia, I can attest to the value the program brings. Without the financial and economic courses I took back in the 10th grade, I do not know if I would be attending Clemson today.
As per the Council for Economic Education’s Survey of the States, only 20 states require high school students to take a course in economics and 17 states require high school students to take a course in personal finance. As the world’s largest economy, we educate our young dreadfully. A study published in 2016 by the University of Wisconsin-Madison showed the differential value in implementing financial and economic education programs in K-12 schools. Urban et al. found that states that chose to enact financial and educational programs saw the credit scores in 18- to 24-year-old’s increase by 15-19 points.
With higher credit scores, individuals’ interest rates are lower, they are able to gain access to greater credit lines, and as a corollary, individuals are granted more financial freedom.
In the 2012 Programme for International Student Assessment (PISA) published by the OECD, of the 18 countries surveyed, the United States ranked ninth in financial literacy, just ahead of the Russian Federation and on average 8 points lower than the OECD average. The differential between our status as a world leader and our secondary education is bilious.
How can we keep the youngest citizenry ignorant to basic financial and economic concepts, such as stocks, bonds, taxes, insurance and gross versus net income? To reference a running joke, today’s high school education will leave you knowing about the function of mitochondria, but not what to do with your W-2. All of the discussion on financial and economic education speaks nothing to the value of understanding more complicated financial tools such as asset-backed securities, credit default swaps, derivatives, forward contracts and reinsurance. While the masses remain ignorant, a storm of financial momentum spins around.
Ignorance breeds inequality. And if we continue to refrain from requiring financial education, we only place inequity between those who know and those who do not. In the 1970 book, “Private Wealth and Public Education” by Coons et al. pronounces the purpose of public schools is to provide equality of opportunity, and therefore unequal access to education ought to be eliminated. By keeping with the status quo in financial and economic education, we are not only failing ourselves but failing the next generation by placing barriers to their ability to become the best individuals they can be.