Table of Contents
Introduction
Financial Literacy is a skill that that is fundamental and important to teach to students at a younger age to expose them to terminology and spending habits that can help secure their financial future. Financial Literacy, according to OECD, can be defined as a combination of awareness, knowledge, skill, attitude and behavior necessary to make sound financial decisions and ultimately achieve individual financial wellbeing (OECD, 2011).
Financial literacy is not just teaching children or adults how to balance a checkbook or handle a bank account, but how to properly handle their financial matters such as loans and credit card debt. These are inevitable situations that students will go through at some point in their educational life and can shape their post-school life. Without proper guidance, students can be taken advantage of by loan companies and fall into a debt that they cannot escape.
The LendingTree is projecting that the total consumer debt will breach the $4 trillion threshold, almost 50% higher than it was during pre- financial crisis of 2008. (The Lending Tree, 2018) The average student debt for the class of 2018 was $39,400, roughly 6% higher than 2017 (Student Loan Hero, 2018). Roughly 3.9 million students dropped out of college with debt between 2015 and 2016 (The Hechinger Report, 2017). As of 2018, over 1 million students defaulted on their loan payments annually (Forbes, 2018); the period that can be considered as a student defaulting on their loans is 270 days or 9 months (Federal Student Aid, n.d.).
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Many of these challenges faced can be alleviated or diminished with knowledge of financial literacy to help guide students out of debt safely. It is the job of educational actors, teachers and parents alike, to develop these skills for students in and out of the classroom. The 2013 report “Innovative Learning Environments” states that learning does not just happen in school or classroom environments due to them being institutionalized and partial (OECD, 2013). The Center For Educational Research and Innovation defined “life-wide learning,” which in this case refers to learning that takes place in work, at home, and in the social life (Schuller and Desjardins, 2007). Parents may not be as well equipped as trained professionals such as teachers or financial advisors, but financial illiteracy needs to become something of the past. I will be assessing the current state of organizations and school requirements for financial literacy and providing possible solutions that could be implemented and improved upon.
Problem/Interview
In the United States, 31 out of 50 states’ primary or high schools do not require any form of financial literacy course for graduation clearance. As of 2018, only five states in the United States require high school students to take at least half of a year’s worth of personal finance courses with specific number of hours needed to complete as a graduation requirement. According to the Champlain College’s 2017 Financial Report Card, the states of Alabama, Missouri, Tennessee, Utah, and Virginia each received a grade of A for their implementation of financial courses in their high school curriculum (Champlain College, 2018). New Jersey received a B for a grade because their students are required to take half of a year’s worth of financial literacy classes or pass a course that includes the elements of financial literacy into the curriculum. Compared to the five other states mentioned, New Jersey does not require a set exit exam for students to take as a form of measurement of success (NJ High School Requirements, 2010).
I sat down with New Jersey City University professor, Dr. Rosilyn Overton, a decorated, tenured professor of finance at the School of Business, as well as, a certified financial planner, about the status of financial literacy in high school and college students. For context, Dr. Overton created the financial literacy course that was approved in 2014 for the NJCU curriculum as an elective course with minimum prerequisites for access to everyone who was interested. She went on to tell me about the different sections that the course covered from creating financial plans, such as savings and money management, to choosing and understanding the financially correct home and car insurance for each student’s situation. Though investments and the stock market were taught towards the end of the semester she wished for her students to get a grasp on the basics of financial management before going on to something as complex as that.
A student in her Fall 2018 course talked to her after class saying that taking this course for one and a half months so far has taught her to not live paycheck to paycheck anymore, as well as, saved up almost $500 already. Imagine if stories like that became the norm for even younger students who are first starting out in the workforce while in high school. Dr. Overton stressed the utmost importance of financial literacy amongst students because of the possible looming debt of student loans and how that can hurt a student’s chances of getting an apartment or a car approval. The organization that will be discussed next is still in the development process at NJCU and Dr. Overton does not yet know what part she will play in its implementation.
Existing and Developing Organizations
There are existing organizations already hard at work trying to educate young adults about the importance of financial literacy, but the problem persists nonetheless. New Jersey City University has introduced a new educational program in April 2018, the Institute for Financial Literacy and Economic Education (IFLEE), which has yet to go into effect as of the Fall 2018 semester. The IFLEE came into existence due to a partnership between NJCU’s School of Business and New Jersey Council for Economic Education to help inform and develop life-long financial skills for students, interested K-12 teachers, and pre-certified student teachers. This institute will also be used as a research conduit for future financial literacy educational opportunities. Not much is yet is known about the IFLEE due to its recent establishment, but it is said to host courses, workshops, and various programs on financial literacy with an emphasis on professional development NJCU’s staff, students, and faculty (IFLEE, 2018).
The Jumpstart Coalition was created in 1995 with the goal of helping develop and improve the quality of K-12 financial literacy curriculum. This organization has created a mapped out set of standards and goals of that students should have reached before going on to the next grade level. The Jumpstart Coalition published The National Standards in K-12 Personal Finance Education in 2015, which was updated in 2017, and it was designed to help create better lesson plans and developmental skills of students but could be applied to professional development programs.
This publication contains a breakdown of each subject and steps to reach an understanding of it with the use of benchmarks for each grade level that students must complete. Managing credit and debt, investing, career planning for personal income growth planning, overall financial decision making, and a few others are the main emphasis of this program’s standards. The Jumpstart Coalition is partnered with roughly 150 financial firms and banks, such as Bank of America, Charles Schwab, Visa, and Wells Fargo (National Standards, 2017). The Jumpstart Coalition administered a survey to see if financial literacy grades would increase before and after taking their course, but the 2008 study concluded that little to no change happened after taking the course (Mandall, 2008).
The National Endowment for Financial Education (NEFE), like IFLEE and The Jumpstart Coalition, created a program that helps the overall progression of the development of financial literacy for high school students, college students, and adults. NEFE is a part of the founding groups that formed the Jumpstart Coalition in 1995. A major benefit that the NEFE has that the other two organizations do not is that they have their own program to design evaluations for learners to take. These questions can be chosen from an existing bank of questions or can be customized questions made by the educator or organizer of the assessment. Each of the programs ran by the NEFE can be accessed online through a program that the user can download and create an account (NEFE, 2018).
Unlike the others, My Classroom Economy (2016) is an industry-funded financial institution but has the same end goal of furthering along the knowledge of financial literacy through online simulations targeted to K-12 students. The program is free for teachers to download and creates a pseudo-economy within the classroom in which students must work to receive digital currency to pay rent for their desk and supplies. This simulation can be considered a form of gamification in the classroom due to its fun nature without directly instructing the content to students but acting as an activity for learning. A study was published regarding how students became more aware of financial management after completing the ten-week program and discussed money and banking with their parents regularly (Batty & et all, 2016).
Conclusion
Even if there are so many different organizations currently helping develop financial literacy in schools for young adults, why is there still such trouble handling debt for students? The United States is a capitalistic society, but the citizens are not well versed in their own financial paradigm. This paradox has many complex layers to it and data measuring tools for the progression of financial literacy are scarce.
The goal of this assessment was to show the organizations and curriculum that are already trying to improve financial literacy amongst students and teachers, while also finding common themes that could potentially take the improvisation a step further. The first theme that can be pulled from all of these programs and organizations is that they are all optional for students to participate in, excluding the states mentioned that call for it as a requirement.
The young adult may not find financial literacy as an engaging or necessary skill that is needed for their age, but it something that could benefit them for the rest of their lives. United States school reforms should follow suit with the five financial literacy course required states, including the 14 other states that require financial literacy-related topics taught, to make it a requirement to complete one or more financial literacy courses to graduate. The passing of a final assessment would be also required to ensure that students understand these skills and know how they can be applied to their lives.
The second possible solution for improving the overall success of programs and organizations is more of an emphasis on the gamification of financial literacy and the introduction of technology. From the examples provided, the one that has had the most success used a simulation that turned the classroom into a pseudo-economic game. Engagement is a critical component to a successful curriculum and with the innovativeness of using tablets or computers for simulations or games can increase the absorption of knowledge by students. This form of intrinsic motivation stimulation can increase the likelihood of students becoming more aware of their own financial situations and over time diminish their chances of long-term debt or even defaulting on their existing debts.
Another important result of implementing technology and gamification to the classroom is the instantaneous feedback provided from programs that contain useful data that can help shape the future of the program. Some examples of the gamification of financial literacy for K-5th grade students are Peter Pig’s Money Counter and Fruit Shoot Coins (2011 & n.d.). Some examples for 6th-12th grade students are Financial Entertainment, Plan’it Prom App, and the Stock Market Game (2010, 2013, & 2013).
References
- How to Teach Financial Literacy
- 10 Best Financial Literacy Websites for Students
- Getting Out of Default | Federal Student Aid
- MyMoney.gov
