School teach skills and topics to prepare children for colleges and work such as reading, mathematics, science etc. Primary and secondary education focuses on various ideas and general knowledge exposed to problems. However, there are subjects many schools never teach American students: financial education.
According to a survey conducted by the Financial Sector Regulatory Authority (FINRA) in 2015, providing financial literacy to children before entering university is essential to become an adult. Ensure their financial security and success. According to CNBC’s article by Shelly Schwartz, high school students learn economics only in 20 states. In addition, only 17 states need students to study personal finances.
Since 2013, the CFPB is required to publish financial and journals of elementary and junior high school students to 50 states by regulation. The CFPB states that “When it comes to adults, young people are not ready to manage their finances.” At the same time, the current financial services market is becoming increasingly complex, and in consideration of this very real need, the US education must include approaches to educate young people to finance .
Picture of a blackboard with formats for daily regular rates and sentences: Calculate the interest on the credit card.
Importance of child’s financial literacy
Definition of Financial Statements
Financial literacy is the ability to utilize knowledge and skills to make effective and informed cash management decisions. Mathematics is certainly not only a part of financial education but also the ability to understand your own solvency and to compensate by avoiding debt and how financial transactions and products make financial decisions based on information It is ability to understand.
The way it can be known
It is important to actively support the preparation of children in the financial world. Financial education can be taught using students of other subjects such as mathematics and history and modules developed by the secondary school’s fiscal planning program, for example. Such training should not focus on complicated economic issues. On the contrary, it should focus on easy-to-learn topics for students and quickly find practical applications. There are five recommendations for CFPB.
Start financial literacy at kindergarten and seek an independent personal finance course for students.
Add personal financial questions to standardized tests.
Provide students with practical learning opportunities and make use of financial knowledge.
Train teachers with personal finance and give incentives for teaching in class.
Giving parents the necessary tools to speak financial problems at home.
Questions about the financial collection
Knowing the financial capacities of children from the beginning and through their educational career brings visible benefits to their adult life. “If young people started their first job, were they already putting money into their retirement account?”, Professor Annanya Lusaldi of the American News & World Report (Economics and Accounting Professor) “When young people are 50 years old It will be a big difference when you are 20 years old. “These skills can be incorporated into existing lessons, such as the lessons learned from the history lessons of the Depression.
Mr. Mark Buchanan, a columnist at Bloomberg, said that personal finance alone is difficult to control alone, “The complexity of the financial system has become explosive in recent decades.” Physicist Buchanan describes how the financial system interacts and predicts and deciphers each other, and helps “help financial institutions conceal risks”. Financial literacy helps students identify themselves and avoid risks themselves.
Young people are not able to manage financial health effectively. According to Time of Martha C. White, more than 20% of the tenants between the ages of 18 and 24 exceed the monthly income of over $ 100. She quotes similar statistics: People born between 1980 and 1984 have an average credit card liability of $ 5,689 a year at their age than parents. Many of these young people will never pay credit card debt as people of this age will also pay their debts with far lower interest rates than their parents. Consistent training in basic financial education will help alleviate this problem.
Line graph showing US public debt as a percentage of gross domestic product from 1790 to 2020.
Benefits of financial literacy
Students learning financial management in the early days often become adults and can live independently. By teaching children to make good financial decisions, they learn how to pay or avoid debt. Lusardi explains “the importance of financial literacy” in his research outlining “individuals make many financial decisions and these decisions are highly interrelated”.
White explains that 42% of young tenants regard rent as the main cost. The rent is less expensive for invoices, food, transportation expenses, etc., so the possibility of spending with credit card will be high. These credit cards are another monthly expenses that contribute to the debt cycle and prevent young people from planning the future through investment and savings.
Paying debt and maintaining a good debt ratio will increase the credibility of young people. According to the US News & World Report, young people can earn better mortgage rates using good credit scores and gain attractive financing options for automobiles and other important financial benefits .
Students learning to navigate the world of debt and credit tend to have more money for savings. It can pay high costs without relying on loans and for retirement accounts. To retire you must be able to provide enough funds to cover annual income. According to Forbes, it is a number that easily exceeds 1 million dollars. Young people with credit card debts will find it difficult to collect this kind of money for retirement.
“In this survey, the credit score of young adults who are taking personal finance courses at high schools has been significantly improved,” FINRA Survey 2015 states. In this survey, with a statistically significant increase (5, 2%), only two years after the introduction of financial education in the state, a statistically significant decrease in the number of students on 90 days (up to 8.4%) with a credit card Payment is only possible after one year. If high school kids are already taught financially, you can imagine this effect in a short time. Imagine the effect that serious financial education can play at the national level for future generations.