Written by Neetu Arnold, research associate at the National Association of Scholars and author of Priced Out: What College Costs America.
The economic devastation caused by the coronavirus pandemic sparked renewed public and legislative interest in financial education in 2021. Legislators in 25 states and the District of Columbia have submitted proposals that would add or expand financial literacy education in public schools. Eight of the bills have already become law, while half of the remaining bills are still under consideration.1
This nationwide campaign is driven by young Americans’ unsettling ignorance of the basics of financial literacy. In one survey, only 16% of millennials could correctly answer basic questions surrounding interest rates, inflation, and risk diversification. At the same time, many millennials believed they had high financial knowledge.2 Far too many young Americans don’t possess basic personal finance skills and don’t even know how little they know.
Financial illiteracy can have broad effects for young Americans as they enter the workforce and begin to make consequential financial decisions. One study found that ignorance of how the stock market works significantly decreased stock market participation rates, which in turn imposes long-term negative effects on wealth accumulation.3 Another report linked financial illiteracy, poor mortgage decisions, and the 2008 financial crisis.4 Americans’ financial illiteracy hasn’t just harmed themselves, but also the entire nation.
A major concern for policymakers today is the student debt crisis, which is also strongly connected to financial illiteracy.5 High school graduates undertake significant financial responsibilities through student loans, often without understanding what an interest rate is. Some have argued that more robust financial education in primary and secondary schools would better prepare students to manage these complex decisions.6
As legislators again consider financial education as a potential solution to economic woes, it is important to look back on previous attempts and evaluate how well they have worked. Legislators have tried many approaches with varying degrees of success, and some programs have proven susceptible to radical social justice educators who envision the future of these classes as ways to “build students’ habits of critical questioning of financial systems.”7 Legislators should take the time necessary to ensure that legislation meant to increase financial literacy education works effectively, and that it forestalls the hijack of financial literacy education programs by radical educators.
Lay of the Land
States that already possess financial literacy education standards have adopted several distinct educational strategies. Many states implement multiple strategies. Some grant individual school districts discretion over how to implement course material. Among this variety, however, there are a few broadly similar approaches.
The most basic choice among financial literacy education strategies is whether to offer the subject as a stand-alone course or as part of the material of a larger course. States split about evenly on this question, with stand-alone courses especially popular among the southern states.8 Only six of the states that are required to offer a stand-alone course have made passing it a graduation requirement. Most of the remainder offer the course as part of another program or as an elective. Five states offer a standardized test of financial literacy, with four out of these five also offering a stand-alone personal finance course.9
States with stand-alone personal finance courses typically take a more centralized approach to financial literacy education. Utah not only offers a stand-alone personal finance course, but also administers statewide standardized testing on the subject and requires passing the course for graduation. Virginia and North Carolina take a similar approach, although they do not require standardized testing. California, however, allows individual school districts to choose whether to include a financial literacy elective course. In Alaska and New Mexico, financial literacy is an optional course that can count toward a high school mathematics credit.10
States which do not offer stand-alone financial literacy courses usually integrate financial education into ostensibly related courses. These states typically integrate financial literacy education into social studies courses such as economics or government, but it has also been integrated into courses in mathematics, family and consumer sciences, and business.11 Maryland’s Anne Arundel County Public Schools incorporate personal finance in reading and social studies curricula throughout elementary and middle school. In high school, they include financial literacy as a unit in both Algebra I and U.S. Government.12
Many states take a comprehensive approach to financial education, with statewide standards and curricula throughout elementary, middle, and high school. Kentucky incorporates financial literacy throughout its K-12 curriculum standards. Elementary school students learn concepts such as the difference between borrowing and buying and the purpose of insurance. Middle school students learn how media technology influences consumer choices and how to use insurance to cover financial loss in relation to a house, car, or healthcare. High school students are expected to have a solid grounding in financial literacy and, as of the 2020-2021 academic year, are expected to take a course for graduation. Topics covered at the high school level include the financial impacts of career choice and how to fill out a Free Application for Federal Student Aid (FAFSA), the required form for federal student aid to attend college.13
Many scholars have researched the effects of educational interventions to increase financial literacy. Such programs do appear to improve financial knowledge. An evaluation of Utah’s financial literacy program found that participants exhibited higher average scores on a written test of financial knowledge and behavior.14 Yet it is by no means certain that financial literacy education affects students’ real-world behavior. Researchers who have attempted to establish whether such courses actually change how graduates manage their money generally have not been able to find a clear-cut effect.
Such studies must surmount substantial barriers to reliable evaluation:
• Financial literacy education approaches vary too widely for assessments of one approach to generalize usefully. A study of the effect of Utah’s required high school course says little about the effectiveness of Kentucky’s comprehensive, integrated strategy.
• A reliable estimate of the effects of financial education intervention on behavior would require verified data on graduates’ spending and saving decisions. Such data is difficult to obtain. Researchers almost universally rely instead on self-reports. While self-reported data is not entirely useless, it is heavily skewed by reporting biases.
• Not enough time has passed to evaluate the long-term impacts of most of these programs. Many policy interventions have short-term effects in the desired direction, but these effects sometimes zero out over time. Researchers cannot yet say whether the zeroing effect will also affect financial literacy education policies.
Nevertheless, researchers have conducted a few meta-analyses (research that analyzes the results of multiple individual studies on the same subject) on the existing scholarly literature. Fernandes et al. (2014) found mixed evidence at best for these programs’ efficacy. Kaiser et al. (2020) found significant positive effects of these programs on both knowledge and behavior. Willis (2021), however, disputed Kaiser’s results on the grounds that the component studies were themselves unreliable.15 Policymakers should view the scholarly literature as inconclusive to date, and likely unreliable for some time to come.
Some specific types of financial literacy programs may have deleterious effects on overall education. Several states combine financial literacy with other courses, and this type of curriculum integration may dilute the content of the original course, particularly if the original course is only a semester long. The cost of diluting another course must be weighed against the benefits, if any, of personal financial literacy instruction.
Moreover, when personal finance instruction is combined with social studies, economics, or civics, it is prone to be captured by teachers bent on subordinating all instruction to social justice education.16 While existing programs have so far only experienced minor social justice incursions, trends in this area suggest that social justice advocates intend a major campaign soon. Alabama’s Career Preparedness course, for example, covers many useful financial management and workplace etiquette skills—and includes a lesson on diversity in the workplace.17 By the 2026-2027 school year, Oregon schools will be required to integrate ethnic studies priorities into social studies standards. Prior to high school, students can expect to learn about the “concept of ‘fair lending practices’ and the history of discrimination and systemic inequalities in the US financial system”; how to define “equality, equity, and systems of power”; and to “explain how inherited wealth and scarcity affect individual and group power and the ability to make decisions about personal savings and spending.”18
Independent nonprofits such as Pockets Change, who create and administer financial education programs, use “hip-hop pedagogy” to teach K-12 students about financial concepts. The organization also provides professional development for educators to use its methods in the classroom. Pockets Change views financial literacy as a means to achieve “self-care and social justice.”19 The intentional use of hip-hop as an educational tool amplifies sub-national identities and perpetuates racial grievances in America. Neither has any solid research proved that hip-hop pedagogy improves knowledge acquisition.20 While states have not adopted Pockets Change’s curriculum as official classroom material, the organization actively works with both students and teachers to promote its curriculum. Given significant academic interest in financial literacy as a tool for social justice, it is not a stretch to suggest that such approaches will likely be the next iteration of financial literacy curricula.21
- States which already have a financial literacy program should commission causal impact studies on the effects of their programs on both knowledge and behavior. These studies should use verified data on saving, budgeting, loans, and investments rather than self-reports, hypothetical survey questions, or games.
- States which already have a financial literacy program should ensure that high school students in their junior or senior year take the course. This is to ensure students retain relevant skills closer to graduation.
- States that already have a financial literacy program should make their curricula publicly available via an online database.
- States with existing financial literacy standards should implement a standardized test. Such a test would serve to ensure accountability by school districts and individual teachers. Students who are home-schooled can also take the exam to demonstrate proficiency to colleges.
- Legislators should be on the lookout for the inclusion of “social justice” or “diversity” narratives in financial literacy standards, which aim to politicize the content. Politically charged topics should be excluded from any curriculum proposal.
- Legislators should not consider any proposal which aims to replace an existing core curriculum requirement such as mathematics with a financial literacy class. If a financial literacy program is to be adopted, it should either be a stand-alone course or should be incorporated as part of a career preparedness program.
- Parents and other interested community members should continue to monitor for diversity, equity, and inclusion instruction. Should it be present in the curriculum, parents should bring the matter up with their local school boards and push to free the curriculum from such content.
Financial Literacy Instruction: State Standards
Arizona: Included in economics; required to implement state financial literacy standards. ARS §15-701.01 High school; graduation; requirements; High School Graduation.
California: Local districts decide whether to offer financial literacy elective to 9th graders; part of economics as well. History Social Science Framework; High School Graduation Requirements; History Social Science Framework, Chapter 14.
District of Columbia: None. Graduation Requirements.
Florida: Must offer stand-alone financial literacy course, but not a graduation requirement. Requirements for a standard high school diploma.
Georgia: Stand-alone courses part of financial services and business clusters; personal financial literacy part of social studies standards. Finance; High School Graduation Requirements; Personal Financial Literacy.
Hawaii: Financial literacy requirements do not seem official at the state level; however, suggestions provided on how to incorporate instruction into courses. Opportunities to Integrate Financial Literacy Concepts; Graduation Requirements.
Idaho: Unit in economics. Grant Brings Personal Finance Education to Every Idaho High School; High School Graduation Minimum Requirements.
Illinois: Part of social studies standards. Illinois Social Science Standards; State Graduation Requirements; Financial literacy standards underway in Illinois schools.
Iowa: Can count as a half unit for social studies; can also be taught as part of math, social studies, and family and consumer sciences. Financial Literacy Guidance.
Kansas: Varies across the state. Timeline delayed for proposed Kansas high school graduation requirements for civics, financial literacy; Kansas high schools where all students take at least one semester of personal finance to graduate.
Louisiana: Personal finance management instruction mandatory; can be incorporated into existing courses. Personal Financial Literacy Instruction Clearinghouse; Louisiana High School Planning Guidebook.
Maine: Part of social studies standards; used to count as a math requirement. Social Studies; Diploma Requirements; An Act To Promote the Financial Literacy of High School Students.
Maryland: Some districts offer stand-alone personal finance courses, while others integrate it into algebra, U.S. history, or economics. Personal Financial Literacy Education; Graduation Requirements for Public High Schools in Maryland.
Michigan: Seems to be tied with economics. Dearborn Public Schools Tests Michigan’s First Financial Literacy Curriculum; Michigan Merit Curriculum High School Graduation Requirements.
Minnesota: Embedded in economics courses from elementary to high school. MN high school seniors might be required to take personal finance course; Graduation Requirements.
Missouri: Personal finance is part of high school graduation requirements. Personal Finance; Graduation Requirements; Missouri adopts revised personal finance standards for students.
Montana: None. Graduation Requirements.
Nevada: Personal finance part of social studies standards. Social Studies; Nevada Graduation Standard and Advanced Diploma Credit & Assessment Requirements.
New Jersey: Personal finance combined with other high school courses (financial, economic, entrepreneurial requirement). Personal Financial Literacy Frequently Asked Questions; New Jersey State Minimum Graduation Requirements by Content Area.
New Mexico: Can be offered as an elective course; can count as a math credit. All of New Mexico’s Students Should Learn Financial Literacy; Graduation Course Requirements.
New York: Personal finance coursework integrated into other classes. Survey finds personal financial education only required in 21 states, but not in New York; New York State Diploma Requirements.
North Dakota: None. Current ND Graduation and Scholarship Worksheet.
Oklahoma: Personal finance education required sometime between grades 7-12; up to district whether material is taught in a stand-alone course or integrated into multiple classes. Personal Financial Literacy Frequently Asked Questions; Core Curriculum.
Oregon: Part of social sciences standards. 2021 Social Science Standards Integrated with Ethnic Studies; High School Graduation Requirements.
Rhode Island: Financial literacy bill will go into effect for the 2022-2023 academic year. Rhode Island enacts financial literacy legislation; Graduation Requirements.
South Carolina: Personal finance integrated into state standards. Standards, Guidelines and Classroom Resources for the Instruction of Financial Literacy; High School Courses and Requirements; SC high school students could be required to take financial literacy courses.
Texas: Must offer personal finance course, but not a graduation requirement; counts as a social studies elective; students in K-8 also required to receive personal finance instruction through their math classes. Personal Financial Literacy High School Elective Frequently Asked Questions; Description of a Required Secondary Curriculum.
Utah: Mandatory; required to take exam administered by state. Utah’s General Financial Literacy Graduation Requirement; Requirements.
Vermont: Found in electives or family and consumer science courses, no standardization. Financial Literacy Education in Vermont High Schools; State of Vermont Requirements for High School Graduation.
Wyoming: None. Wyoming Graduation Requirements.
2 Andrea Bolognesi, Andrea Hasler, & Annamaria Lusardi, “Millennials and money: Financial preparedness and money management practices before COVID-19,” Research Dialogue, TIAA Institute, 167, August 2020.
3 Joanne Yoong, “Financial Illiteracy and Stock Market Participation: Evidence from the RAND American Life Panel,” Wharton Pension Research Council Working Papers, October 1, 2010.
4 Jeffrey T. Dinwoodie, “Ignorance is Not Bliss: Financial Illiteracy, the Mortgage Market Collapse, and the Global Economic Crisis,” University of Miami Business Law Review, July 1, 2011.
7 See Andrea Ferrero and Brian Kushner, “Teaching Finance as an Act of Social Justice,” One Day, Teach for America, April 20, 2021; Carrie Schwab-Pomerantz, “Financial Literacy: A Powerful Tool for Social Justice in 2020 and Beyond,” Charles Schwab, January 15, 2020; David Stocker, “Mathematics for Social Justice: Flipping the Script on Financial Literacy,” ETFO Voice, Winter 2020.
8 About half of the fifty states require schools to offer a stand-alone personal finance course, while the other half do not. Many of the states that offer a stand-alone personal finance course, however, also integrate financial literacy into other courses.
9 Analysis conducted using Council for Economic Education data and evaluation of each state’s curriculum, where available. Survey of the States: Economic and Personal Finance Education in Our Nation’s Schools, Council for Economic Education, 2020.
10 “An Overview of the New History-Social Science Framework for California Public Schools: High School,” California Department of Education; 2020-21 High School Program of Studies, Anchorage School District, July 2020, p.40; “Graduation Course Requirements for Students in the Graduating Classes of 2022-2025,” New Mexico Public Education Department.
11 “Indiana Financial Literacy Education Standards,” Indiana Department of Education; “Maine Learning Results for Social Studies (Revised 2019),” Maine Department of Education.
12 “Personal Financial Literacy Education 2019-2021 Report,” Division of Career and College Readiness, Maryland State Department of Education, April 2020, pp. 10-11.
13 As of the 2020-2021 academic year, high school students are required to take a program or course in financial literacy to graduate. “Kentucky Academic Standards — Career Studies,” Kentucky Department of Education, August 2019.
14 “Utah’s General Financial Literacy Graduation Requirement: A Program Review,” Office of the State Auditor, October 5, 2018, pp. 3.
15 Lauren E. Willis, “Alternatives to Financial Education,” Los Angeles Legal Studies Research Paper No. 2021-11, 2021; Tim Kaiser, Annamaria Lusardi, Lukas Menkhoff, and Carly J. Urban, Financial Education Affects Financial Knowledge and Downstream Behaviors (NBER Working Paper No. 27057), National Bureau of Economic Research, 2020; Daniel Fernandes, John G. Lynch Jr., and Richard G. Netemeyer, Financial Literacy, Financial Education, and Downstream Financial Behaviors, Management Science, vol. 60, no. 8, 1, 2014.
16 See David Randall, Making Citizens: How American Universities Teach Civics (National Association of Scholars, 2017).
17 “Career Preparedness Course Outline and Pacing Guide,” retrieved from Etowah County Schools.
18 2021 Social Science Standards Integrated with Ethnic Studies, Oregon Department of Education.
20 See John McWhorter, “How Hip-Hop Holds Blacks Back,” City Journal (Summer 2003); Edmund S. Adjapong and Christopher Emdin, “Rethinking Pedagogy in Urban Spaces: Implementing Hip-Hop Pedagogy in Urban Science Classroom,” Journal of Urban Learning Teaching and Research 11 (2015): pp. 66-77.
21 See Madalina Tanase and Thomas A. Lucey, “Interdisciplinary Connections: Teaching Mathematics for Social Justice and Financial Literacy,” Journal of Mathematics & Culture, vol. 9, 1, pp. 108-118, 2015.