Personal Finance Education is Essential

Attending a recent Board meeting for an agency that helps working homeless families obtain sustainable permanent housing, a thought struck me. We partner a licensed clinical social worker with families to help them on their journey while we offer temporary rent subsidies based on the client’s ability to afford 30% of the housing and utility costs relative to their monthly income,

Much of what these social workers do is help with budgeting for “needs” and prioritizing less “wants.” Yet, another key element is to require the parent(s) to attend classes on personal finance training. We partner with another agency to do just that.

The thought I had is we should require high school students to take a semester course on personal finance. One of my sons took this course as an elective, so I know the curriculum exists at least in our public schools. And, he benefited from it.

This course could run the gambit from monthly budgets to checking/ savings accounts to investments to credit/ loans to ID theft prevention. We are largely a financially illiterate nation. This would help educate people to make more informed decisions.

To illustrate my point, there was an economic study in New York several years ago called “Class Matters.” The study demonstrates that people in a lower socio-economic class ask fewer questions of advisors, bankers, lenders, etc, when they should be asking more. I call it the “suit and tie” effect. This is how people can sign up for mortgages they cannot afford, how they can succumb to predatory lending on car loans or make the mistake of using a pay-day lender. These folks are preyed upon because of their financial illiteracy. This also is one of the reasons for the 2007 housing crisis as lenders provided mortgages to riskier lendees.

I am not saying mandatory personal finance training will end homelessness or poverty, but it will arm our graduates to budget better and ask more questions. Avoiding 23% car loans can impact a budget in a major way.

If you agree, please reach out to your local papers and politicians. To me, this a sustainable and impactful change.

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19 thoughts on “Personal Finance Education is Essential

  1. I think it would be great if this were a prerequisite. We need to learn more about the things that will truly have an impact on our lives, something like this could make all the difference in the successful management of personal finances and save a lot of our young people the destruction of economic disaster.

    • Thanks Holly. I have reached out to the editor of our paper to see if it is worthy of an op-ed piece. If he does not agree, I will seek other avenues to get the word out.

  2. Note to Readers: I ran this concept passed my college sophomore daughter who is home for the weekend. She gave a resounding “yes” to the idea. She said it should also include applying for jobs and resume writing.

  3. I have long advocated for mandatory classes in basic household economics… the type of financial knowledge that a fully functioning adult needs to get through life. I think some schools offer them, but many (most?) do not. I don’t remember taking anything like that in junior or senior high school. Fortunately, my parents made sure my brothers and I knew the basics – sometimes by overtly teaching us, but often just by their setting an example.

    Classes like this could be taught by retired volunteers who have backgrounds in both finances and teaching. What a win-win that would be!

    • Janis, I agree about the volunteer work force. This would be great training for all those bank sponsored toastmasters classes for their employees. Keith

  4. Note to Readers: One of the tools our agency uses is a matching savings program while in the program. We will match up to $500, so our families can leave a temporary shelter to move into an apartment with $1,000 saved.

  5. An interesting notion. If the high schools were doing what they are supposed to do there wouldn’t be room for such a course. But as things are, there is plenty of room for a course that would be this practical.

    • Good point. Yet, there would be a benefit by lessening the fear of finance and asking questions. I was thinking of the Sidney Poitier movie “To Sir with Love.” Teach the kids how to handle things.

  6. Dear Keith,

    I couldn’t agree more. My son and I were discussing this issue just the other day. Along with a required financial management course which would be essential, we were talking about the need for a life skills curriculum. My son’s point of view that a course should exist to show young people how to search out solutions like going on the internet to get instructions on how to do something. I argued that one could use practice in addition, like home economics and shop. Young people could benefit from courses like nutrition, how to shop smartly and how to cook healthy meals; how to change a tire, the oil in a car etc,; how to sew a hem; how to refinish a piece of furniture. I am talking about life skills that show folks how to live well with little monies.

    Hugs, Gronda

  7. What an excellent idea! I know entirely too many young people who do not even know how to reconcile a bank statement, and live by the philosophy of spending money as long as it’s there, then being broke for a week before the next payday.

  8. I think it is a failure on the part of the school system which doesn’t teach personal finance education. Having knowledge on personal finance empowers one to be able to make wise decisions when it comes to choosing investments, budgeting etc.

    • John, I totally agree. Having helped my son the past few days on health care insurance claims issues, a rudimentary understanding of healthcare plans and definitions and how to interface with customer service departments would help as well. Thanks for dropping by. Keith

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