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Why is Personal Finance Important in High School?Bill Field2024-03-26T22:09:35+00:00
Why is Personal Finance Important in High School?
It is critical for people to learn how to properly manage their finances, but why is personal finance important in high school? Because at that age, students are transitioning from being kids to becoming young adults. High school is the perfect time to learn personal finance skills because they are just about to start making their own decisions about their own money for the first time. When students learn personal finance in high school, they are able to quickly use their new knowledge in the real world. Learning it in school, then quickly doing it for real is the best way to solidify any knowledge into practice. That’s the answer to the question, “Why is personal finance important in high school?”
Personal Finance Courses in High School Are Important for a Stable Life
While financial literacy education is important at any stage in life, why is personal finance important in high school in particular? Multiple studies have found that building a strong foundation of prudent financial practices from an early age results in individuals more prepared to handle themselves financially in the future. The answer to the question, “Why is personal finance important in high school”, is that if young adults are educated on sound financial practices before they start dealing with their own money, they have a chance to avoid trouble before it begins. Once financial trouble starts, it is very hard to overcome. Being proactive and having high school students complete personal finance activities that will benefit them in the real world is a good place to start.
Personal Finance Learned in High School Impacts Entire Lives
Low-income workers attending an employer-sponsored financial education program were 11.5% more likely to participate in 401(k) plans and save more for retirement than peers who elected not to attend the education initiative (National Bureau of Economic Research). http://www.nber.org/papers/w5655.pdf
Researchers asked individuals two sets of questions, one pertaining to basic financial literacy while the other related to advanced financial knowledge. The researchers then applied statistical techniques to construct indexes of financial knowledge. The probability of participating in the stock market increased 14 percentage points with a one standard deviation increase in advanced financial knowledge. In addition, a one standard deviation increase in basic financial literacy increases the probability of saving for retirement by 20 percentage points (De Nederlandsche Bank). https://www.dnb.nl/en/binaries/working%20paper%20313_tcm47-257145.pdf
Parents and High School Personal Finance Courses Lead to Positive Money Habits
Parents who have three or more types of savings are more likely to have kids who discuss money with them (83% vs. 66%) and less likely to have kids who spend money as soon as they get it (40% vs. 52%) or lie about their spending (34% vs. 43%) (Money Confident Kids). http://www.moneyconfidentkids.com/content/dam/money-confident-kids/PDFs/PKM-Surveys/2017_PKM_Results.pdf
An additional year of schooling increases the probability of having an investment income by 4.4% for whites and 1.7% for blacks (Harvard Business School). http://www.people.hbs.edu/scole/webfiles/cole-shastry-smarts%20HBS%20working%20paper.pdf
Behavior Shows Lack of Personal Finance Skills After High School
Only one in five (19%) say they are not knowledgeable about annuity products in retirement (1 or 2 on a 7-point scale), suggesting many overestimate their knowledge of annuities (The American College). http://retirement.theamericancollege.edu/sites/retirement/files/2017_Retirement_Income_Literacy_Report.pdf
65% of adults in the United States report using a saving account (National Foundation for Credit Counseling). https://www.nfcc.org/wp-content/uploads/2017/03/NFCC_BECU_2017-FLS_datasheet-with-key-findings.pdf
More than 20% of renters aged 18-24 overspent their income by $100 per month (Time). http://business.time.com/2013/01/17/todays-young-adults-will-never-pay-off-their-credit-card-debts/
Almost 50% of millennials don’t believe they could come up with $2,000 within the next month if an emergency arose (PwC). https://www.pwc.com/us/en/about-us/corporate-responsibility/assets/pwc-millennials-and-financial-literacy.pdf
11.5% of 2014 college graduates have loans in default (Federal Student Aid Office of US Dept of Education). https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html
Importance of Communication for Quality High School Personal Finance Education
How can we lower the number of students defaulting on student loans, lower the number of near retirees realizing they don’t have adequate savings, lower the number of individuals who fall prey to poor investments? The answer to all of these questions is to confer upon individuals the financial knowledge needed to assess financial decisions and build healthier habits. Including a dedicated personal financial class for high school students or providing high school-level personal finance curriculum for teachers to include in core classes a good start. Financial literacy, when done right, can facilitate this transfer of knowledge and induce the behavior molding that will improve the financial outcomes of learners.
The Citi foundation notes how opening clear communication channels with education providers, policymakers, and regulators minimizes wasteful overlap of redundant research, and helps all parties to focus on increasing financial capability (Citigroup). https://www.citigroup.com
COHEAO stresses ‘deep learning’ through interaction with the students and with interactive portions of the curriculum that encourage understanding. (Coalition of Higher Education Assistance Organizations). http://www.coheao.com/wp-content/uploads/2011/04/COHEAO-Whitepaper-Financial-Literacy-on-Campus-.pdf
“Being promoted to a top position in your organization, or even being elected to public office, does not suddenly endow you with financial literacy, if you did not acquire and develop it, earlier in your life.” – Strive Masiyiwa, founder of Econet Wireless
“The good news, though, is that all of us can improve the security of our futures through financial literacy. With a better understanding of the basics of finance—how to save, budget and invest—we can increase both our earning potential and our prospects for a solid financial future.” – Reba Dominski, President of U.S. Bank Foundation
“The single biggest difference between financial success and financial failure is how well you manage your money. It’s simple: to master money, you must manage money.” – T. Harv Eker, author of Secrets of the Millionaire Mind
Personal Finance Education in High School Is Important for a Stable Financial Life
Why is personal finance important in high school? High school students have not spent enough time with financial matters to ingrain poor financial habits into their routines. Constructing a strong foundation of knowledge that enables shrewd financial choices in the future is an invaluable skill is just one of the benefits of personal finance that will serve students well, regardless of the career path they choose to pursue once out of high school. When asked, “Why is personal finance important in high school”, an educator can respond that they are interested in setting the student up for a stable financial life.
