American students from kindergarten through high school absorb countless lessons in math, science, English and history. But when they leave school and come face to face with the real world, most are likely to find themselves shortchanged in the financial skills department.
Now there’s a growing effort under way to nudge money management closer to the head of the class. As a result of legislation passed over the past several months, the number of states requiring students to take courses in personal finance has nearly doubled this year.
Adding impetus to the push for financial literacy, Merrill Lynch in March launched a program called Investing Pays Off, a multimillion-dollar effort linking Wall Street with Main Street, designed to bring real-world financial lessons into America’s classrooms.
Such a program is overdue, said Eddy Bayardelle, head of global philanthropy for Merrill Lynch in New York.
“Young people are expected to make the right decisions when they reach 18,” he said. “Yet our schools don’t teach them the financial skills. How can they make the right judgments? They are the ones that end up making the wrong decisions, and wind up paying the consequences. And it takes a long time to repair the damage.”
Partnering with Merrill Lynch on the development of the curriculum was the New York-based National Foundation for Teaching Entrepreneurship, which works with low-income youths to teach them financial skills and how to start small businesses.
Foundation president Steve Mariotti said his organization believes lack of financial literacy is one of America’s most serious problems, one partly resulting from schools being unprepared to teach the skills.
“Our savings are so low, home ownership is not as great as it should be, business failure is too high, our retirement funds are not where they should be,” Mariotti said. “The general ability of people to use their resources and live within their means is not where it should be.
“A lot of these things are like health issues. They could easily be solved with 100 hours of training and mentorship, and the younger the better.”
If there is growing concern students are leaving high school without necessary financial management skills, considerable credit should go to Jump$tart Coalition for Personal Financial Literacy, a Washington-based national organization promoting financial literacy among young adults.
But the heightened awareness of the issue hasn’t yet translated into positive results, said Dara Duguay, executive director of the organization who claims financial illiteracy is only growing worse.
Since its founding in 1997, Jump$tart Coalition has administered a 31-question financial literacy test to American high school seniors. The scores have declined steadily since 1997, reaching a low of 50 percent in 2002, the most recent test year, Duguay said.
Much of the blame must be laid at the doorstep of American public education, she added. As of the start of this year, just four states, including Illinois, mandated personal finance be taught in schools at some level between kindergarten and 12th grade. In the other 46 states, personal finance is within the curriculum but only as an elective, Duguay said.
Three other states–Kansas, Louisiana and Utah–have passed legislation this year that will mandate personal finance education be taught in school.
Illinois has required some personal finance education longer than any other state, said Joanne Dempsey, executive director of the DeKalb-based Illinois Council on Economic Education.
She said Illinois’ law has been in existence for more than two decades. Illinois high schools are required to ensure that every student takes a class called Consumer Education before graduating.
“In most schools that’s met by a one-semester class,” she said. “In some cases, it’s an economics class that includes the required consumer topics, budgeting and credit. There’s not a single course that you’re going to find at every high school. They meet the requirement in a variety of different ways.”
Still, Illinois and other states with personal finance requirements could be doing more to advance financial literacy, experts believe.
Among suggested steps is greater classroom assistance and training for teachers, said Catherine Williams, director of education for Consumer Credit Council of Chicago and a state coordinator for Jump$tart Coalition.
“A lot of times, new curriculums will come out, but if the teachers are not properly trained, and they don’t understand how they meet state standards, the curriculums are not as widely utilized,” she said.
Another recommendation is that personal finance lessons begin earlier than high school, said Dempsey. She said that while a one-semester class in high school is helpful, it takes place after spending habits are established.
“Children have access to money at very young ages, through allowances and earning money in small ways,” she said. “Once they’re to the point of having money they control, they need to start learning the habits of good money management.”
The problem is parents cannot be counted upon as the source of that guidance. They were not taught money management skills themselves, and often feel uncomfortable talking to their children about personal finance, Dempsey said.
Because young children can’t depend on parents for lessons in money management, Dempsey’s organization believes the teaching of personal finance should begin in the primary grades and be integrated across the curriculum.
“We don’t expect elementary teachers to teach economics or personal finance,” she added. “But they can be teaching the concepts within the courses they’re already teaching.”
Getting children started early on a life of responsible money management is among the goals of the Merrill Lynch program. It is designed to be used by three different age levels: 7 through 10, 11 through 14 and 15 through 18. In each age range, students are taught 15 core principles and strategies designed to help them manage their own finances and build personal wealth. Each strategy can be presented in a 45-minute session.
They cover topics ranging from simple budgeting to investing options, saving for college and the development of leadership and entrepreneurial skills.
Some schools are using Investing Pays Off as a summer school program, while others are extending it through an entire academic year, he added. The program is also being taught to children in churches, community centers and Merrill Lynch offices.
Moreover, the teachers are themselves Merrill Lynch employees. “It’s done in a way teachers could never do,” Bayardelle said. “Long-term planning and investing are things we do on a daily basis. So when we get a Merrill Lyncher in front of kids, learning is connected to real-life situations, and then it becomes fun and relevant.”
The entire curriculum of Investing Pays Off is available online at www.volunteer.ml.com. Bayardelle said inquiries have come from schools, universities, home schooling families, church groups, non-profit groups, governmental entities, parents and PTAs.
“This isn’t just about money,” he said. “It’s about leadership, it’s about decision making, it’s about exposing kids early to the world of business.”
