Lack of personal finance – budgeting in high school

Budgeting and financial literacy is a critical skill to have. The earliest that someone starts to understand this and develop this knowledge the better. So it is very unfortunate that less than 20 states require students to take classes to develop this critical skill. We at strongly believe that mandatory financial literacy is just one of the many things that could possibly help reduce poverty in this country.

We tried to collect some data around budgeting. So over the last 30 days we tracked some requests sent to us. While it is not always possible to determine the exact cause of a financial hardship, we estimate that 10-20% of the requests are, quite frankly, ridiculous. If people had some form of ability to manage their personal finances maybe all of those requests could go away

Examples of this ~20%

We received a request from a single mom with 9 kids (and who is now pregnant again) that needs food. So why does someone have 9 kids when it costs tens to hundreds of thousands of dollars to raise one? What chance is she given to the kids having the proper education and opportunity they need? How will any person pay for college or education for 9 children? Instead those kids have a great chance of perpetuating the cycle of poverty. Maybe if she knew how expensive a kid was to have, and learned this in high school or some other time, then maybe better planning would have been done.

A family wanted help to pay their high priced cable bill. That is completely ridiculous. Cable TV is a “want” and not a “need”. If they knew how to budget their income then they would have know to turn off the television service and use something that is either free (or low cost). With millions of kids not having a consistent source of food, it is outrageous to ask for help paying a cable bill.

Someone wanted money to pay a $500+ car payment on a 2015 car. So why are they buying a new car if they can’t afford it in their monthly budget? Think about just the immediate depreciation on a new car. Budgeting can teach students to never take out loans on “depreciating” assets, such as car. Instead get a used auto with a much lower monthly payment.

There are other examples as well that we have received over time. Those are a just a few. Now if every high school taught personal finance, would the problem go away? We doubt it. But even if it helped X percent of households live within their means then that would be that many fewer people that struggle.

What is being done in high schools?

Not much. The Council for Economic Education’s shows that 67% of states do not require personal finance classes (33 states total). So the vast majority of students are not taught the basics. They are not taught about the risks of taking on debt, how to live within means, the cost of raising a kid, the “magic” of compound interest, etc. We think it is terribly discouraging that states do not mandate this.

Only 20 states require economics to be taught. While this is not quite the same as budgeting, at least it will cover some monetary concepts such as saving and investing. But even those 20 states mean that 60% of states do not require high school students to take this class. Very sad.

Unfortunately students may need to seek resources outside of their high school. There are workshops as well as classes held by the National Endowment for Financial Education (NEFE). They can try non-profits for budgeting classes, including credit counseling agencies. They can also seek help from other charities, including online tutorials, classes held by credit unions or community banks, and much more.

No matter which option is used, it is critical to teach high school students (and even those in middle school) the basics of persona finance. People need to know how critical it is to budget their income. They should know how and why to “plan for the first and hope for the best” when it comes to budgeting. So find a resource and teach your kids!

Leave a Reply

Your email address will not be published. Required fields are marked *