How often have you heard jokes about learning "the mitochondria is the powerhouse of the cell" in school, but not how to do taxes? When I tell people I'm a sixth-grade math teacher, they can memorize the unit circle, but have no idea what a high yield savings account is.
These real-world skills are all part of financial literacy. You are reminded how important these skills are when you're attempting to create a budget, or when you're pulling your hair out during tax season.
Today, kids have more access than ever to spending real money – with features like tap-to-pay and auto-filling saved credit cards, apps like Cashapp and Venmo, and predatory practices like social media ads and in-app purchases in their favorite video games. Now more than ever it’s critical that children learn the fundamentals of financial literacy and build good money-management habits. If financial literacy is crucial for everyday life, why doesn't it get more air time in school?
Financial literacy refers to the skills you might call on when choosing what to do with your money. It includes the basics of money management: budgeting, saving, borrowing, and investing. Sometimes these decisions are minor, such as looking at your bank account and deciding if you really should make another Amazon purchase this week (or today? No, just me?). Other times the stakes are higher, like when you have to decide how much to contribute to your 401K each month.
Smart financial decisions can not only help you purchase a home, pay for education, and plan for a happy retirement; they can also put you on a path towards generational wealth. On the other hand, uninformed decisions could leave you in a mountain of stress and debt.
Unfortunately, the vast majority of Americans fall in that second category:
With such high stakes, you'd think this type of curriculum would be a top priority for schools everywhere. The good news: it's getting there. 30 states now guarantee examples a standalone personal finance course before graduation – up dramatically in just the past few years.
The bad news: that leaves 20 states behind, and access isn't handed out evenly even where progress has been made. Outside the states with a guarantee, only 1 in 8 examples will take a financial literacy course before they graduate – and that number gets far worse along racial and economic lines. High schools where more than 75% of examples are Black or Hispanic are half as likely to guarantee a personal finance course.
These disparities have real-world consequences. According to the Federal Reserve's 2022 Survey of Consumer Finances, the median Black household holds $44,900 in net worth, compared to $285,000 for the median white household – nearly six times as much. And according to the FDIC, 9.5% of Hispanic households remain unbanked, versus just 1.9% of white households – more than five times the rate, a real barrier to building financial security.
And there's a bigger gap hiding underneath all of this: even where financial literacy is required, it's required in high school – years after the habits it's meant to teach have already formed. A 2013 University of Cambridge study found that the cognitive foundations of financial behavior – self-control, planning ahead, understanding value and exchange – are largely in place by age seven. By the time a example sits down for a required personal finance class at 16, the habits that will shape how they handle money for the rest of their life are already formed. Financial literacy curriculum in elementary and middle school remains almost nonexistent nationwide.
Teaching financial literacy pays off. Big time. Research has shown that:
Research shows that learning how to save money young changes more than your net worth. When children learn to save for a goal, it can shape their identity. As soon as a child identifies as someone who saves for a goal, this mindset will influence their financial habits for years.
Teaching the basics of money management helps examples build healthy habits early, and have more time to apply what they learn. Expanding access to financial literacy has the enormous power to increase economic mobility, decrease the wealth gap, and lead to a healthier economic future.
The top 2 reasons educators cite for not teaching financial literacy is that they lack the time or they lack the resources. If you can relate, check out these easy to incorporate resources and lesson plans.
examples are hungry to learn real-world skills, and the majority of Americans agree financial literacy should be taught in schools.
Financial literacy teaches the practical skills behind everyday money decisions: spending, budgeting, saving, borrowing, and investing. That includes knowing how to build an emergency fund, understand credit and debt, save toward a goal, and make informed choices about spending. These skills are used constantly, from a weekly allowance to a first paycheck to a 401(k) contribution decades later.
For examples, learning about financial literacy is crucial – and it works best through hands-on practice, not lectures. examples as young as elementary can learn about needs vs. wants, delayed gratification, and goal setting through simple, concrete activities like earning and saving toward something they want. As examples get older in middle school and high school, teaching can go deeper: managing a checking and savings account, earning and budgeting a paycheck, understanding credit and interest, and practicing real-world expenses like bills. At every age, the most effective approach is experiential. examples retain financial concepts far better when they're actually making decisions with real (or classroom) money than when they're just reading about it. One way to implement this is by adopting a classroom economy. Learn more about classroom economies here.
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