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A cry for help: A push for financial literacy in K-12 education

4 min read


Annamaria Lusardi

 This post is sponsored by The Council for Economic Education.

The latest PISA results painted a bleak picture about what young people know about money. Financial literacy expert Annamaria Lusardi talks about what these findings mean for our young people and society at large, and what we need to do now to change.

America’s youth face a number of challenging financial decisions as they head into adulthood — from opening their first checking account to buying a car to financing their college education. The choices they make will have a profound impact on their long-term future.

But do these millennials have the financial skills needed to make these types of complex decisions? According to data from the 2012 PISA financial literacy assessment, the answer is no.

“Many young Americans lack the basic skills to manage money,” said Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center at George Washington University. The GFLEC designed the financial literacy section of the PISA. 2012 marked the first year financial literacy was measured in the triennial survey.

According to Lusardi, who also serves as a board member for the Council on Economic Education, about one in six young Americans scored below the basic competency level on the PISA. At best, these students have a rudimentary understanding of money principles. They can distinguish between needs and wants, make simple spending choices, understand common financial documents such as invoices and bank statements, and perform basic numerical operations, such as addition, subtraction and multiplication.

But the experts say that’s not enough. “We live in a world of increased individual responsibility,” Lusardi said. “They face much more complex financial markets than in the past and opportunities to borrow and take up debt have increased a lot.” For example, people now have to decide themselves how much to save for retirement and how to invest this money, while previously, the majority of people received company pensions.

This presents a problem for those who lack financial literacy. According to research from the GFLEC, these individuals are less likely to save for retirement, invest in stocks or take advantage of the opportunities offered by financial markets.

They’re also more likely to have issues with debt, a problem that affects not just the individual but society at large as well, said Lusardi. “The consequences of taking up too much debt or the wrong mortgage on individuals and society have become painfully evident with the financial crisis,” she stated.

So how do we remedy the situation? According to Lusardi, education is the key to addressing these gaps.

“In my view, it is critically important to have financial literacy in school,” she said. “This is how we learn any other topic — history, math, science. We start early and as simple as possible and build upon it.”

Lusardi said that children can begin learning these lessons as early as kindergarten and first grade, when they begin receiving money from the Tooth Fairy. She illustrates this point in her blog, writing about her niece Giorgia’s reaction when Lusardi asked her if she’d like to learn about money. Giorgia ran to grab her piggy bank, sparking a conversation about saving and investing.

Including personal finance in K-12 curricula also ensures that all students have access to quality information. The PISA data found a link between financial literacy and students’ economic background. Kids whose parents are highly educated or high income earners tend to be financially literate. “This is another reason why we need financial literacy in high school,” said Lusardi. “So everyone can have access to it.”

But making that happen requires new advocacy efforts in our communities. As of this year, only 22 states make economics a required course for graduation; only 19 make personal finance a required course, according to the Council for Economic Education’s 2014 Survey of the States report. Lusardi urges parents and community leaders to become ambassadors for financial education in their schools.

“This data is a call for action,” she said. “We know now that most students are not financially literate; they lack this basic but fundamental skill to live in the 21st century. Ask for [financial education programs] in your school districts and encourage your business community to support the training of teachers. Everyone will benefit from higher financial literacy from the young.”