Financial literacy classes are touted as the new solution for learning how to manage money. Schools are expected to add financial literacy classes even though it’s not entirely clear what information should be included or who should be teaching this subject and in what grades.
How does learning to manage money compare with getting a driver’s license? The first step for getting a license is to take a driver’s education class to gain knowledge about driving rules and regulations. The next step is a learner’s permit and hands-on practice driving with a licensed driver to develop the skill of driving a car. All states have a similar process for teenagers to get a driver’s license.
Does your state require financial literacy classes? Probably not. According to Jump$tart Coalition for Personal Financial Literacy only three states: Missouri, Utah, and Tennessee, require at least a one-semester course devoted to personal finance.
Seventeen states: Arizona, Colorado, Georgia, Idaho, Illinois, Kansas, Louisiana, New Hampshire, New York, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Virginia, and West Virginia, require personal finance instruction be incorporated into other subject matter.
The remaining 30 states have no requirement. (However, personal finance may be taught electively.)
So what is the definition of financial literacy?
Financial literacy, according to Jump$tart is: “the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security.”
Wikipedia tells us that, “Financial literacy is the ability to understand finance. More specifically, it refers to an individual’s ability to make informed judgments and effective decisions about the use and management of their money.”
The ESQ Financial Educators Group definition is, “Financial literacy is the ability to understand money and how to manage it, so that you can make financial decisions that will benefit you now and in the future.”
Being a Wisconsin resident I looked through my state’s model academic standards for personal financial literacy and could not find a definition of financial literacy. There was a quote from the department of financial institutions stating, “Financial education provides the tools people need to realize their dreams for themselves, family and friends.”
In addition, Alan Greenspan was quoted as saying, “No matter who you are, making informed decisions about what to do with your money will help build a more stable financial future for you and your family.”
What is in financial literacy curriculum?
The seven content standards for Wisconsin are: relating income and education; money management; credit and debt management; planning, saving, and investing; becoming a critical consumer; consumer and financial responsibility; and risk management. This is all good stuff to know about but the performance standards (what the students will do) are knowledge-only terms such as: identify, analyze, explain, discuss, apply, compare, describe, and evaluate.
Driving a car is a physical activity requiring both knowledge and skill. Managing money is an active skill requiring practice using the financial literacy knowledge that is learned in the classroom. Schools do not and cannot offer hands-on practice with money, only parents can do this.
If your teen can identify, analyze, explain, discuss, apply, compare, describe, and evaluate the motorist’s handbook for your state, is she ready to drive a car? As parents, we expect that in the driver’s education classroom kids will gain knowledge. But everyone knows that’s not enough to pass the road test.
If there is a financial literacy course in your school, what are your kids going to learn? That’s the topic for the next blog.Follow me on social media: