“The number one problem in today's generation and economy is the lack of financial literacy.” - Alan Greenspan, former chair of the Federal Reserve.
In 2019, the U.S. Treasury published a report, Best Practices for Financial Education at Institutions of Higher Education, where they stated that financial literacy should be a “priority for all higher institutions.” This statement holds much validity: students in college often lack the knowledge of credit, how to properly budget themselves, or assume loans without much research. College students are there to obtain a degree that will potentially land them a job to pay off their loans. As of 2020, student loan debt is estimated to be 1.7 trillion. However, college is a concentrated market with many students from affluent backgrounds. We believe that if the United States begins prioritizing financial literacy only at the higher education level, this is a mistake as it fails to capture a larger group of students.
We disagree with the U.S. Treasury’s stance to have financial literacy mandatory in college. Instead, Building Blocks for Kids believes financial literacy and career based education should be taught at the high school level.
We, as students, are already making financial mistakes before college. Here is a list of reasons why it should be taught in high school:
A portion of the population will not get the information. Around 34% of 2019 high school graduates did not go to college. Students of color and those from underserved communities are deeply impacted by the financial literacy gap. Ensuring that our underserved youth receive this critical financial education begins by implementing a robust program at the high school level. Through our mission, we seek to bridge the generational wealth gap and promote social mobility for underprivileged communities.
The earlier the knowledge is given, the better the decisions. Reality hits when awards letters are emailed. Students are often faced with anxiety on what type of loan is best for them. For students without college educated parents or those that don’t come from wealthy backgrounds, this can lead students to fall for scams and high interest loans. By introducing the topic of debt and loans earlier, high school students can be more prepared to explore their available opportunities to have the best financial aid package.
Poor financial decisions are often made before college even starts. Students don’t understand what debt they're getting into or what credit cards are all about. Credit and credit scores are being destroyed due to a lack of knowledge. Students get trapped in debt without being educated on finances. Additionally, students and young adults may be targeted by credit card companies, getting in deep trouble when they are not provided the proper information. This also happens with bank accounts where students are not always aware of overdraft fees, minimum balances or other miscellaneous charges.
Financial literacy works in high schools. In 2014, the Federal Reserve Board of Economics conducted a study measuring the relative credit scores of adults who had undergone financial literacy education as high school students and those who had not. They conclusively found that those who had been exposed to financial literacy education in high school had higher credit scores than those who had not been exposed. Countless similar studies found that a robust training and curriculum works even over a 30 hour program period. Some argue that teaching high school students is ineffective as they are too busy, not completely focused, or too immature to understand the importance of financial literacy. While we understand that at face value it's easy to categorize high school students as such, we must look closer at the truth of what really happens when high schools teach financial literacy education.
The stock market is meant to be public, not exclusive. For the majority, those from underprivileged communities tend to live paycheck to paycheck which means lack of disposable income to invest. As a result, children are largely unaware of what the stock market is, let alone how it works. By making financial literacy mandatory in high schools, the stock market will truly be public. Students will be equipped with the knowledge to find their own stocks, invest in index funds, and ultimately start creating generational wealth. In a market where the average return is about 10%, the power of compound interest can generate the wealth to promote social mobility. By introducing investing and the power of time, high school students not only bridge a learning gap, but are also motivated to design their own investment portfolio and generate returns.
Parents are not talking about financial literacy enough. In fact, a T. Rowe Price survey showed 69% of surveyed parents have a reluctance to discuss financial literacy with their kids. This inhibits how much knowledge they are exposed to and the opportunity to explore their entrepreneurship and money spirits. Even if there is not enough money for allowances, children, especially those from underprivileged communities, are imaginative and able to create innovative ways to make money. This can lead to savings, which parents can speak more about, and even open savings accounts for their kids which can be accessed later.
Some would argue that financial literacy in high school would be ineffective as most concepts can be out of reach for the high school demographic. In addition, many feel financial literacy programs do not work as this information cannot change future behaviors of students. However, these are claims that have been proven false.
Building Blocks for Kids recognizes claims by others and takes them into high consideration when implementing our program. Through our signature MORE program, we have educated students across Los Angeles County on how to properly budget, create a bank account, build savings, and understand credit. These students have been fascinated by our program and have embarked on their own journeys with this financial knowledge. Financial literacy has prepared them for college, but more importantly, it has moved them to become entrepreneurs and turn their dreams into reality.
We believe that financial literacy should be taught in high school and be available to as many students as possible to progress towards equal opportunity. In the spirit of the voting season, let us know what you think! Financial literacy in high school or college? Leave a comment / tag us to share your thoughts.