Story first appeared in USA TODAY.
Starting this fall, Virginia high school students will need more than reading, writing and arithmetic to snag a diploma. Incoming high school freshmen will be required to take a one-credit course outlining the ABCs of economics and personal finance.
Virginia joins a handful of states, including Missouri, Utah and Tennessee, that mandate a class in financial education. Similar legislation aimed at improving students' financial literacy has been introduced in Maryland, while several states require teachers to weave personal finance lessons into existing coursework.
Combined with grassroots efforts by non-profits and financial institutions, it's all part of a nationwide push to keep Generation Y from making money mistakes that could haunt them long after they graduate from college.
For younger children, the "Money Matters: Make it Count" partnership between the Boys & Girls Clubs of America and the Charles Schwab Foundation has brought financial literacy lessons to more than 245,000 students since it made its debut in 2004.
The effort extends beyond grades K-through-12. Starting last year, an eight-part course in personal finance became part of the four-year curriculum for Champlain College in Burlington, Vt. Students who don't complete a seminar on time lose their ability to schedule classes for the next semester, says John Pelletier, head of Champlain College's Center for Financial Literacy.
A recent Teens & Money Survey by Charles Schwab found that 16-to-18-year-olds are more likely to own an iPod, cellphone or computer than they are to have a savings or checking account. The survey also found that parents are more likely to nag their teens about cleaning their rooms or discuss the dangers of drugs and alcohol than talk about smart money management.
Teaching the teachers
Students aren't the only ones with a steep learning curve. More than half of teachers say they feel unqualified to use their state's financial education standards, and few feel very competent lecturing a class on topics such as risk management and debt. If states are serious about students' financial education, Pelletier says, they need to be equally serious about ensuring that teachers are qualified to take on these concepts.
This month, Champlain and Pelletier hosted the third Jump$tart Teacher Training Alliance pilot this year, which is testing a training model for personal finance teachers.
Laura Levine, executive director of the non-profit Jump$tart Coalition for Personal Finance Literacy, says the pilot program is designed to develop a model that can eventually be used to prepare teachers around the country to tackle financial issues.
Levine says the need to address financial education isn't new, but it hasn't been a high priority, usually falling somewhere behind basket-weaving.
The real wake-up call for many, she says, came in 2008, adding that it might be one of the silver linings of the recession that this has been front and center on people's minds.
High-risk behavior
A University of Arizona analysis of college students' financial strategies before and after the recession found significant increases in "risky" coping strategies, such as dropping classes or postponing health care. The number of students who used one credit card to pay off another increased by 26%.
Shan Shafiq, who spent the past three years at a community college near his home in Calif., said he's seen this pattern play out.
While his vigilance when it comes to saving money has enabled him to transfer to the University of Southern California next semester, not all his friends have been as frugal, he says.
He added that they're cutting back on classes, not going to classes, not paying for class rather than not paying for other stuff. He said it has been a motivation for him to not go in their tracks and not be as miserable.
Poor budgeting today could be more costly than ever when it's time to enter the job market. President and CEO of the National Endowment for Financial Education Ted Beck says the rules of the game have changed for Shafiq and his peers.
For twentysomethings, he says, the prospect of finding a job with defined benefits and pension programs — if they find a job at all — is especially slim, post-recession.
In addition, many graduates will have to cope with student loan payments. In 2008, the average college student graduated with more than $23,000 in student loan debt, according to the National Center for Education Statistics.
When he talks about personal finance education, Beck likes to point to the Thorndike Arithmetics textbook as one model that's been used to bring everyday money management into the classroom. The textbook includes sections on calculating interest on loans, understanding insurance rates and making a purchase using an installment plan. The date on the book's copyright page? 1917.
Beck states that this is how you learned arithmetic around World War I, and these were skills people needed then, and they're skills that people need now.
