Midterms might be over, but the thought of final exams has many students are stressing already. But some students — to the dismay of many — aren’t sweating their knowledge on financial literacy.
The reality is that most students aren’t making the grade when it comes to learning about personal finance. According to U.S. Bank’s recent survey, 65% of students gave themselves a C, D or F when considering whether they can successfully manage their finances and money.
One solution to this problem? More education in the classroom.
One proponent of this solution is Jim Chilton, founder and president of the Society of Financial Awareness. With 35 years of financial advising experience, he’s shocked that his children hanen’t learned about financial literacy topics in schools. Had he not taken it upon himself to teach them, Chilton believes they wouldn’t have learned sufficient information about finances.
“I’m just completely blown away that if my wife and I didn’t provide some kind of a foundation in the form of (financial literacy), they would’ve gotten nothing,” he says.
Reports have found a lack of financial literacy education in high school. Champlain College’s Center for Financial Literacy, for example, graded each state for their financial literacy requirements for high school students. The alarming results revealed that 26 states received grades of C, D or F.
Chilton isn’t the only proponent of more education. USA TODAY College asked Twitter followers if they’d learned financial education in high school or college, and the overwhelming majority reported not learning as much as they wanted.
So, where do we put this education in? And how do we teach it?
According to John Pelletier, director of the Center for Financial Literacy at Chaplain College, the solution isn’t to place financial literacy in one place — high school or college — but rather to weave it through the education system.
“That’s kind of like saying ‘do you think math should just be taught in middle school or high school?’” he says. “All learning is cumulative.”
Pelletier believes that a class in high school should emphasize basics pertaining to student loans. High school students should learn not to allocate more than 15% of their post-college graduation income to student loan repayments. Additionally, he says high school students should estimate their starting post-college income and make sure it exceeds their total student loan debt.
Chilton echoes Pelletier’s sentiments regarding financial literacy education being taught in high school and college, adding that students should be learning about budgeting and planning in high school.
At the collegiate level, Pelletier believes that students should start learning about more advanced topics like credit, credit scores, employee benefits and retirement savings. Students should also begin learning about compound interest, and how it can be great if you’re on the receiving end but detrimental if you’re paying off loans.
“If you get compound interest growing for you when it comes to saving and investing, so if you can double your money every decade at 7%, that’s the benefit of compounding.“ Pelletier says. “Compounding works the other way with debt. If you get credit card debt compounding at 23% a year, that can be problematic.”
Chilton adds that students should start learning about investing in college. They should know what’s an asset versus a liability, how to qualify for a home and have general understanding about insurance, deductible debt and even learning how to make a will.
He notes, too, that throughout the entire education process, students should be learning the basics of personal finance so they have the tools to develop their knowledge in the future.
“What we’re trying to do is lay a foundation, not build the Empire State Building of knowledge.”
Source - USA Today