Teaching Financial Literacy in Schools

We know that we want to prepare students so they are ready to deal with life beyond school; in that sense school is not just about school – but conceivably, about almost anything.  So when I got a LinkedIn pitch from a company offering a course to teach our students financial literacy, I was intrigued, and prompted to do a little research.

Statistics seem to suggest that attitudes to money are changing; writer Kerri Renzulli explains that while overall debt tends to vary with age, within every age bracket people seem to be holding higher levels of debt.  In the US “younger people are taking on debt at a higher rate and paying it off at a lower rate,” says Ohio State University economics professor Lucia Dunn, suggesting that the $13 trillion (!) personal debt of Americans is likely to grow.  Even here in traditionally-prudent Singapore, household debt reached a record 61.1% of GDP in 2016, significantly up from 45% in 2010 (ValuesChampion.com).

So are school courses in financial literacy the answer?  Journalist Stacey Rapacon thinks so, quoting financial planner Taylor Schulte: “I think the state of financial literacy in schools is pathetic.  Our school systems will spend countless man hours debating how math should be taught while most students don’t even know the difference between a credit and debit card…. we are a long way from where we should be.”

This does indeed raise fundamental question about what’s worth knowing; and what should be taught in schools, and what should be left to families (learning to drive?  To cook?).  And regardless of your views on that, it’s also important to look at what actually works.  Writing in US News, journalist Susannah Snider quotes an (admittedly unreferenced) meta-study “and found that financial education did little to improve subsequent financial behaviours. ‘Our meta-analysis revealed that [the] financial education interventions studied explained only about 0.1 percent of the variance in the financial behaviours studied,’ the [study] concluded.”  Other studies seem to have found the opposite: a recent meta-analysis of 126 studies that found that financial education has a significant impact on financial behaviors and financial literacy – but even then “specific behaviors, such as the handling of debt, are more difficult to influence and mandatory financial education tentatively appears to be less effective.”

So should we be worried?  For me, the jury is still out – perhaps the rise in personal debt is actually a very rational response to the current extremely low cost of money in recent years; we’ll see as the rates rise.  And if we are to start teaching financial literacy, it will need some careful thought as to the best way to do it – I am not sure that teachers are necessarily very well equipped to do so; and I would want to think very carefully about what we would stop teaching to make room for these courses.  Most of all, I wonder if the best way to teach financial literacy if to ensure (a) mathematical fluency with percentages, compound and simple interest (b) reading fluency to understand a set of terms and conditions (c) critical thinking and scepticism to be wary of deals that look too good to be true.  As always, the more important things to teach are attitudes and the desire to think carefully.  These things are, of course, already in our curricula.

So perhaps we don’t need new mandatory courses but just the space and room to do what we have always done, and to do it better.