In late October of last year, Ohio Governor Mike DeWine signed a bill into law mandating that all high schoolers in the state take a half-credit, standalone personal finance class prior to graduation.
Upon the signing of the measure, Ohio became the 10th state in the Union to require personal financial literacy and education courses at the high school level. It is also the largest state to pass the bill, taking effect in more than 600 school districts.
“I was a banker for 41 years and I saw the results of us not teaching our children financial literacy,” said Ohio state Senator Steve Wilson, chair of the Ohio Senate’s Financial Institutions and Technology Committee, and a primary sponsor of the bill. “I wanted to do something about it.” Considering the timing with regard to the pandemic and so many businesses still fighting for their lives, there is little doubt Ohio is ahead of the curve.
According to Forbes, within the previous two years, seven states – Alabama, Mississippi, North Carolina, Tennessee, Utah, Virginia – successfully passed legislation mandating students take a semester of standalone personal finance education courses in high school; one is currently implementing the legislation (Iowa), four (Nebraska, Florida, Rhode Island, and now Ohio) are readying to implement the legislation in the near future.
As April represents Financial Literacy Month, QCash would like to highlight the mission of financial literacy to all Americans – children, students, and adults – in order to raise financial health awareness in all areas of consumers’ lives. While we realize there is much work to be done, we also know we have the financial tools and knowledge necessary to guide America’s challenged communities back on the path to financial wellness and economic success.
Creating more confident and knowledgeable credit union members and consumers
Consumers are currently battling with financial literacy nationwide, and it started with the dynamic with which they were introduced to money from childhood forward.
A well-known study by Standard & Poor’s in 2016 discovered that only 57 percent of adults in the U.S. are financially literate — financial literacy defined as one being able to understand three out of four fundamental concepts for financial decision-making. Such unnerving statistics lead us back to the school mandates in financial literacy and education.
While these new mandates are getting quite a bit of attention, teaching personal finance isn’t exactly a new concept. Most states contain laws that advocate for including personal finance courses in high school curricula, but most are relegated to bit parts in larger courses like economics. Many experts are not particularly fond of this take on personal finance education.
“If personal finance is not guaranteed as a standalone course, unfortunately it doesn’t always get taught because of overcrowding of curriculum,” says Christian Sherrill, director of partnerships and advocacy at Next Gen Personal Finance, a nonprofit advocacy organization for personal finance education in high schools. Her colleague Brian Page adds, “Without that kind of education, we’re thrusting kids into a world to learn to manage money through the school of hard knocks. He follows up by stating that high schoolers need personal finance education now, as many are already making decisions around money, positive or negative, that will determine their futures, long-term.
So how did one of the world’s most prosperous nations arrive at this present? Tanya Van Court, founder and CEO of the goal-based savings app Goalsetter, told Forbes that for most of us, the issues with finance begin at an early age and follow us through adulthood. “Parents can’t teach what they were never taught,” she says. “That means we have generation after generation just trying to get by. Children who were financially uneducated become adults who are financially uneducated, and on and on we go.”
Nearly eight in 10 teenagers in the U.S. do not maintain a savings account. Eighty-seven percent claim they don’t really even understand their personal finances. Finally, only 27 percent are aware of what entails inflation and understand how to calculate a simple interest rate. To Van Court, this development doesn’t just involve the working poor or the underbanked. “This is as much a problem for Morgan Stanley families as it is for McDonald’s families. Even 90 percent of wealthy families are projected to lose that wealth by the 3rd generation.”
3 ways your members can help kids learn and improve financial literacy
We are hesitant to limit commentary on learning opportunities to just children in school. The following financial literacy steps can apply to people of all ages! For the sake of narrowing focus on one particular group who can take action to change the future of financial health in the U.S., today’s students certainly seem like the best group to accomplish that long-term objective.
As schools are beginning to administer financial education, expert insiders recommend that parents do not exclusively depend on those school classes. Taking action to construct a strong, sound financial foundation starts at home, with parents who show where those school lessons apply to real-world situations.
“The pandemic brought to light how important managing your money is because so many had to cut back or lost their jobs,” says Leigh Singleton, director of Monifi Bank Money Moments, a consumer financial education program. “It’s an important topic to teach our kids. As parents, we’re their biggest influence when it comes to money and they need to see us as parents practicing money concepts in real-life situations. Research by the University of Arizona found that children do, in fact, learn more about finances from their parents than any other source.
If any of your members are unsure how to educate their children about money or personal finance in general, consider getting started with the following steps, courtesy of Forbes Advisor.
Get started with the basics!
Many of us grew up knowing that talking about money was a faux pas, something to “shush” your mouth about. Two decades into the 21st century, depending on where one lives, that wall is slowly being chipped away. Research from the Journal of Consumer Affairs has shown that during childhood we build the groundwork for our financial well-being for later in life, which makes the effort to open up and talk about it even more important.
According to the Consumer Financial Protection Bureau (CFPB), talking about the basics of money and consulting their “Money As You Grow” web page can begin with children as young as the age of three. Topics that would be good to cover from young childhood to early adulthood include simple earning, saving, planning, borrowing, and insurance.
What kids see, they emulate
Children look up (literally!) to their parents and those consistently in their orbit of influence and how they deal with things – especially when it comes to personal finance and regular money habits. Providing a financially-savvy example entails showing children the right way to approach financial situations while framing them in a positive mindset.
Singleton offered an example of a parent shopping with a child when the youngster sees a pair of shoes they want. The parent knows that the family is saving for a summer vacation. While the shoes can’t be purchased at the moment, the parent communicates that the vacation is a bigger priority than the shoes. Singleton adds that this is a chance to talk about why they won’t be buying the new shoes and what the money will be used for instead.
“We should talk to our kids about our money choices and sacrifices,” she says. “And it’s important to be positive about them.”
Does practice make perfect? Let’s find out
After learning the basics of money and personal finance, allowing them the space to live out their recent education through real-life practice can help them imprint those practical experiences in their heads, along with the mistakes they may have made along the way. The CFPB says kids as young as six can begin gathering experience with money.
Part of that youthful trial and error is providing children with their own money. If your family has the capability, the Financial Industry Regulatory Authority (FINRA) advises offering children a regular allowance – however small – that enables them to experience what it means and feels to learn how to manage money. Boosting their confidence and emboldening them to save as much as they can before the next allowance date can only encourage them to make the best decisions in any particular moment to spend or save their dollars wisely.
With the advent of digital apps and gaming in this digital age, there are also plenty of financial education apps geared to children, many of which come with prepaid debit cards and functions to invest, track spending, and other tools. Most of these are best suited for teens and young adults.
The QCash platform is also a strong personal finance educator in having members learn how to prioritize funds and learn how to plan their financial lives ahead of time in order to get back on the path to better financial health. If your credit union is looking to add a robust, SaaS-based, mobile financial health asset to your suite of digital service products, we invite you to request a demo!