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The Education System Should Include Financial Literacy Training

The problem with academia is that, if there are any changes to be made, it is a very slow process. Financial literacy is present within some schools, but absent in many others.

Financial literacy is a lifelong learning skill that not just one person needs to know, but every person must know – and use – whether they made it through high school, college or graduate school. Education level doesn’t matter.

Life skills are what we should be teaching in public education systems. The education systems need to figure out how to make that happen to teach students the skills they will use throughout their lives.

It’s Not Quite Like Home Economic Classes

I think we need to make educators, parents and students aware that financial literacy is necessary and important. Human nature says if you don’t find the importance in something, it’s hard to follow through with it. So, that’s where it all starts, in stressing and illustrating its importance.

There are so many organizations that will provide resources for free. They’re willing to go in and help, to provide the education, and give students and faculty this vital information. It is a grassroots, ground-up movement. And it must be done right.

You might remember when home economics classes taught the girls everything but economics or anything resembling money or finances. I had those courses. I learned how to make food in the kitchen and how to sew a pair of shorts. Unfortunately, I never learned how to write a check. It was not part of the education. I relied on my parents for that.

But some kids cannot rely on their parents. If their parents didn’t have education on finances and are not doing those things correctly now, how will they ever teach their children?  So, that’s why, as an education system, it’s our responsibility to educate more in depth on the things we know students will need for life.

Starting Early is Best

When you think about it, there’s no reason why we can’t teach these basic skills starting in first grade and kindergarten. As kids work through the primary, middle school and high school years, obviously, the curriculum evolves and gets more intricate. The information also becomes more relevant to students’ life skills. Starting from the ground up can help make that applicable.

Once in college, financial literacy needs to continue, but it needs to be learning about retirement – 401(k), saving, budgeting, allocating, your credit score, etc., basically, the things that apply when you graduate. The information needs to start and keep evolving. We see waves of it happening with different colleges and high schools. Unfortunately, in a 2017 national study of high school personal finance education, Pennsylvania received a grade of “F”. But progress has been made since then. In 2019, it was adopted to recognize the month of April as “Financial Literacy Month” in Pennsylvania. This was to acknowledge the importance of increasing financial literacy among residents of the Commonwealth. A bill has also been proposed, making it a requirement for high school students to pass a financial literacy course and then go through a capstone presentation in order to graduate.

Start Here

If you don’t have a starting point, it’s hard to grow. The fundamental starting point is teaching what the stock market is. Kids are starting to be exposed to more complex ideas, such as cryptocurrencies. We have to educate them on the fact that this is another form of investing that is very risky and they must understand the consequences of risky investments. There are upsides; and there are tremendous downsides.

If students don’t understand the basics of making money, saving it for retirement, then the investment aspect of it is not going to make much sense to them. I think that is a steppingstone in understanding many different concepts.

Compelling Emotions

Fear and greed are two very compelling emotions and their influences usually lead to making decisions that are not always in our best interest, and that’s why talking to a financial advisor is extremely important. You’ll see that he or she takes the greed and fear out of investing and makes decisions that are in your best interest. Because they know your emotions can get the best of you.

If you pull out of the market at the wrong time, you could potentially lose out on a lot of gains. And if you are greedy, like putting too much in when it’s at a high, you can get hurt. Working with a financial advisor helps you prepare for the future.

As a CERTIFIED FINANCIAL PLANNER™ practitioner and a Certified Personal Finance Counselor® professional with The Weber Group at Hefren-Tillotson, I would write a book on financial literacy for the school systems. It would stress understanding the concept of money: how it works; the value of money and what it can do for you. That’s how we teach kids in the primary grades. And then, we work our way up.

How do you get money? How do you earn it? How do you spend money? What does it do for you? What does your credit score do for you? What is a 401(k)? What are profit-sharing plans? It is an evolution that needs to start around the concept of money ­– your own concept of money – because everyone values money differently. You have to know your own self-concept and what money means to you to understand how it’s going to work now and in the future.

Not everyone comes from a household that had the right money concept and attitude. A dollar comes in, a dollar goes out is not a great money concept. That’s not how we save for our futures. Sadly, some parents never had this education. So, being able to educate students early on, and showing them real numbers when putting away $100 per paycheck and how it compounds over time is essential.

When we show students these real numbers – to be a millionaire when you retire, just by starting to save early – they say, “Wow! I can do that!” It makes more sense, it makes it more personal, and more realistic when we show them it was possible. Of course, we must also try to break the bad habits that had been ingrained in them for such a long time.

Do You Have a First-generation College Student Within your Family?

If so, and if your family never went to college, how can he or she have any idea of what their student debt is going to be when they leave college? Think about it. From future salary to debt to income ratio, these things are not understood unless they’re taught. That’s why financial literacy is important when going into the real world from high school.

Those who decide to go into a trade need to understand how they’re going to make money, and how they will start saving for the future. These are things that not only public K-12 education needs to handle, it’s universities too. It’s our responsibility to explain to these students that if you’re coming here for a particular degree, it’s going to cost you this much. You’re going to get a job that’s going to give you this much salary. This much of your salary is going to be paying towards your student debt. Not educating them is truly a disservice to our college students – and a disservice to students in general – because it’s our responsibility as an education system to do so.

I proudly serve as Advisory Board President of The Pennsylvania State University, New Kensington. I pursue my mission to help build a culture of financial literacy education at the campus with a resourceful staff and motivated students. As a former teacher, I educate my clients and their families through in-person meetings and webinars because I believe in the power of education; its power to acquaint the unfamiliar, and its ability to triumph over the unknown.

I would be happy to contribute to your family’s success as well. Contact me today for more information or to attend an upcoming webinar. I would love to meet you.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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