When it comes to money matters, American teens are just barely average, according to the latest PISA results. The good news, though, is that U.S. K-12 schools are gearing up to do something about it.
American teens have a lot to learn about finances and money management, according to a new report from the Organization for Economic Cooperation and Development.
The OECD report detailed the findings from the 2012 Program for International Student Assessment, a triennial survey that measures literacy in reading, math, science, general problem solving and finances among 15-year-old students across the globe. The test evaluated students’ basic knowledge of financial concepts, issues and decisions, with 2012 being the first year it was included in PISA.
About 29,000 students from 18 countries participated in the financial literacy assessment. Top scorers included Shanghai-China, the Flemish Community of Belgium and Estonia. In the middle of the pack are Latvia, the United States and the Russian Federation. Italy and Colombia ranked the lowest.
The results highlight a painful reality: American students are woefully lacking in basic financial skills. They struggle to understand complex financial concepts or make sound financial decisions.
Fortunately, new efforts are underway to change this reality. According to the Council for Economic Education’s 2014 Survey of the States report, US K-12 schools are placing renewed emphasis on financial literacy education. This year’s study found that:
- All 50 states, plus the District of Columbia, now include economics in their K-12 standards.
- These standards are required on the district level in 45 states and the District of Columbia.
- In 24 states economics is offered as a high school course.
- To graduate, high school students in 17 states must take a personal finance course.
But there is still work to do. Only 22 states require economics for high school graduation. Student testing of economic concepts is mandatory in just 16 states, while only six states test financial literacy knowledge. If the US is going to increase financial literacy among its young people, K-12 schools will have to take the lead on making this a priority in the standard curriculum.
“Economic and financial education is important because our kids need to graduate with an understanding of basic concepts,” said Nan J. Morrison, the president and CEO of the Council for Economic Education (CEE). “The 17 states that require a personal finance course today represent only about 40% of the U.S. population. That’s a huge gap and we need to close it. We must expand our high school curricula and then provide our teachers with the tools they need to help students develop these essential real-world skills.”
Mississippi State Treasurer Lynn Fitch agrees. Fitch is spearheading an effort in her state that will require all high school students to take a course in personal finance in order to graduate. “I feel very strongly that America will never truly get public spending under control unless we as Americans culturally change the way our personal finances are managed,” writes Fitch in CEE’s report.
Fitch recommends schools provide more instruction on the fundamentals of economics and personal finance, including budgeting, banking, insurance, managing credit, saving for retirement and emergencies. She writes: “Early and better exposure to the economic way of thinking and personal finance best practices will help our young people understand the value of managing financial tools before they become submerged in debt.”
But this type of instruction doesn’t just benefit our youth, she asserts. Financial education creates opportunity and security for our nation as a whole.
“Teaching the basics of personal finance better can culturally change our financial practices, leading to a more financially literate public and more stable, stronger America,” Fitch says.