A little bit of financial education could go a long way to improve our nation's financial health.
You could probably do trigonometry and basic calculus when you graduated from high school. But did you know how to balance a checkbook?
The school system has always been set up to help you get a job and make money. Personal finance lessons to help you keep that cash, however, are few and far between. The fallout from this curious arrangement has undoubtedly contributed to the recent crisis in the American economic system, which started with a few million bad decisions and unnecessary risks taken by American consumers.
What's the problem?
This particular crisis might have been prevented by a few simple lessons in money management and personal finance 20 years ago. Today, 43 percent of American families make less money than they spend. Is it any wonder that personal bankruptcies have skyrocketed? Faced with financial problems themselves, parents don't often feel qualified to teach their children about personal finance. The burden falls on the schools, and children often leave high school without any financial education at all.
Only seven out of 50 states-Georgia, Idaho, Illinois, Louisiana, Missouri, South Dakota, and Utah-require a personal finance class before handing out a high school diploma, according to a 2007 National Council on Economic Education survey.
The good news is that seven states is way more than the single state that had this requirement in 1998, and at least 40 states at least spell out standards for personal finance education to their teachers, up from 21 in 1998. If we continue down this track, the next generation of American savers, borrowers, and consumers stands a chance of doing better than today's adults.
Finding money to teach money
Should school boards nationwide divert funds from education in science, history, the arts, and physical education to jumpstart more personal finance projects? It's a tough battle to fight, as all of these subjects deserve funding. But personal finance is a topic that affects everyone, every day. We can't go far wrong with a dash of education on money and how to manage it, so it won't go "poof" and disappear soon after your children cash their first paychecks.
Money problems can break up marriages and serious relationships, cause severe damage to career plans, and generally lead to untold amounts of personal misery. With a damaged credit report from the early years, you may not be able to get back on your feet again for decades. On a grander scale, the economy suffers when millions of young Americans walk into today's complicated financial world completely unprepared to make the tough choices that shape their financial futures.
If your children's school doesn't teach personal finance, it's your responsibility to teach them the ABCs of APRs and responsible credit use. Only one in three adults know what deductions are taken out of their paycheck every month. Together, we could get closer to 100 percent and a brighter financial future.