Teaching about Saving and Investing in the Elementary and Middle School Grades.

Abstract

FOR SEVERAL YEARS advocacy groups have recognized the need to strengthen financial education in the K-12 schools. Current statistics support their concerns. Financial illiteracy in the United States is astoundingly high. From 1992 to 2000, disposable personal income for Americans rose by 47 percent, but personal spending rose by 61 percent. In those eight years, the overall personal savings rate fell from nearly 6 percent to zero. Half of all Americans today are living paycheck to paycheck. Fifty percent of all adults have not started saving for retirement. For many Americans, unpaid credit card balances exceed 401(k) balances. These are but a few of the statistics that point out the importance of preparing young people to manage their personal finances intelligently. (1) Information pertaining specifically to young Americans underscores the general problem. Young people aged 12 to 19 are big spenders. They spent $175 billion in 2003, and only 21 percent anticipated spending less in 2004. In spending these sums, many young people relied heavily on credit. A Teenage Research Unlimited study found that 32 percent of 18- and 19-year-olds have credit cards in their own names. But many of them apparently handle credit poorly, as evidenced by the fact that more young people filed for bankruptcy than graduated from college in 2001. (2) Not surprisingly, assessment data show that young people do not understand basic concepts about money. (3) High school students' scores on Jump$tart Coalition assessments have been declining since the first survey was administered in 1997. (4) The message is clear. Young adults are leaving high school without adequate preparation for managing their financial lives. Curricular Responses to Date The schools to date have not responded adequately to the problems described above. As of 2002, 48 states and the District of Columbia had curricular standards for economics. (5) Of these, however, only 34 states required implementation of their standards, and only 17 states required students to take an economics course in high school. Only 31 states, moreover, had standards for personal finance; only 14 of these states required that their standards be implemented; and only four states required students to take a personal finance course in high school. For the most part, then, high schools offer courses in economics/personal finance as electives. This means in practice that most students continue, even after the advent of the standards movement, to graduate from high school with no personal finance or economic education at all. One might wonder whether subsequent college coursework will compensate for this shortcoming. But only about 40 percent of high school graduates go on to college, and only a small portion of those who do go to college take courses in economics or personal finance. (6) Our young people themselves know that they need personal finance instruction--even those who think they do a good job of handling their money A study conducted by the American Savings Education Council and Employee Benefit Research Institute showed that only 21 percent of students aged 16 to 22 reported having taken a personal finance course. (7) Only 15 percent of these students said they understood financial matters well, and only 18 percent thought that they did a very good job of managing money. Forty-nine percent of those who thought they did a very good job of managing money indicated that they didn't know as much as they should know. Doing It Better: The Case for an Early Start Observers generally have focused on weak financial understanding among young adults, thus building the case for financial education at the secondary school level. Less attention has been paid to the early grades. But building a rationale for economics and personal finance education in the elementary grades isn't difficult. Economics is the study of decision making in the context of limited resources. …