Last year, I taught personal finance at a local high school and realized that the parents appreciated the teaching as much as the students did. I would get emails from several parents of my students letting me know how much they appreciated their child learning about mutual funds, for example, since they had not been exposed to this topic. These parents would state that they now felt more confident when choosing how to invest for their retirement. Many more parents informed me that they had very fruitful conversations with their children that led them to make wise financial decisions.
I began to realize how beneficial personal finance classes are for the parents of enrolled students. It is especially important to offer these classes prior to graduation, since many students will juggle credit card debt and student loans.
I wondered how college students are handling debt, and I searched for statistics. In order to understand the financial capability of those in college preparing to become part of the future workforce, EVERFI surveyed a nationally representative sample of over 30,000 college students from more than 440 institutions located in 45 states. The survey, conducted in fall 2018 and spring 2019, found that:
- 47% of students do not feel prepared to manage their money
- 36% of students say they already have more than $1,000 in credit card debt
In early June 2019, the Federal Reserve Bank of New York revealed that:
- Credit card delinquency rates increased to an 8-year high.
- Over 8% of balances held by those 18 to 29 are at least 90 days overdue with no payment.
How can educators, parents, and employers help instill good money management principles and increase financial literacy to students before they go to college?
State Legislatures to the Rescue!
Currently, one third of the states are helping address this issue by requiring students to graduate high school having taken a personal finance class, according to the Council for Economic Education (CEE). In North Carolina, Senate Bill 134 stipulates that high school students would have to pass a financial literacy course to graduate. The bill, introduced in February 2019, would create a self-contained course and has garnered bipartisan support. The financial literacy class would include lessons on paying for college, home mortgages, credit scores, car loans, managing credit cards and “the true cost of credit.” In addition, the state would also provide funding for teacher training.
In order to fully immerse students in the world of personal finance, I believe that instructors should employ hands-on tools such as online budgets downloadable to smart devices, and interactive games.
I have used the following great resources when teaching personal finance and stock market investing to high school students:
- The Stock Market Game™, an online simulation that allows students to invest a hypothetical $100,000 in the stock market.
- The SIFMA Foundation, an independent 501(c)(3) educational organization dedicated to fostering knowledge of the financial markets.
- The North Carolina Council on Economic Education (NCCEE), which provides technical and financial support for the game and hosts a contest with other high schools in the state. The NCCEE organizes awards banquets and recognizes teams who rank the highest regionally and on a state level.
What About the Financial Literacy Education Gap?
It’s great that high school students in North Carolina will be taught how to maintain a budget and how to invest, for example, but what about their parents?
- 50% of American households live paycheck to paycheck
- 25% of Americans have nothing saved for retirement.
Perhaps these statistics are not so surprising, considering that unless you studied business in college or took finance-related classes, most people simply did not take a financial literacy class.
These same adults are now going to have children looking for support from them as they complete their homework. This financial literacy gap may put may parents in the awkward situation of having to teach themselves financial literacy lessons after work, perhaps late at night. Many will not want to admit to their children that they don’t know how to budget or invest.
Employers, Ditch Some Company Gear and Educate Instead!
Employers have an opportunity to close the financial literacy education gap between students gaining financial literacy and their parents who have not had the same opportunity. Offer financial literacy workshops to your employees. This will truly demonstrate that you are a progressive employer who cares about your employees’ financial well-being.
Fortunately, according to the American Management Association (AMA), employers are starting to realize that it’s not just physical health that impacts employees but their financial health as well. Employers know that wellness programs can improve employees’ health and their profits. They should now use the same reasoning when it comes to their employees’ financial health. Employees who are financially sound and without significant financial worries at home are happier and more focused while at work. The AMA found that that financial-related stress distracts approximately 40 percent of employees for two to three hours per week. In addition to lost productivity and increased anxiety and depression, stress over money made these employees three times more likely to have ulcers and digestive tract issues.
In the past two years, more than 40 percent of employers have reported an increased employee demand for financial education, according to the International Foundation of Employee Benefit Plans. Among the employers that offer financial education programs, 24 percent reveal they have a financial education budget in 2018. This still leaves room for improvement.
How can employers create a budget for financial education? Ditch some of the company promotional gear!
I understand that promotional items are needed for marketing purposes, but how many promotional items do employees really need? Many companies give employees mugs, backpacks, luggage, and shirts, but not one single type of financial literacy workshop. Offer financial literacy workshops at your place of business.
Once you decide to include financial literacy workshops into your budget, plan to offer them on separate dates. Do not offer marathon sessions. Instead, offer workshops on selected topics, perhaps weeks apart and with “homework” that will be checked at a subsequent workshop. Allow employees time to acquire knowledge and practice their new skills. For example, allow them time to use a new budgeting app for a month and then follow up with a workshop where employees can ask questions and share insights learned while budgeting for a month.
The Result: More Focused, Loyal Employees!
Not only will employees gain valuable insight into financial management, they will feel grateful that they can help their children with financial literacy topics and return to work the next day without worrying about how to help their children with financial matters. They will feel like they are more in control over their finances, understand the value of their retirement plans, health benefits, and other financial plans their employer may offer, and overall feel more valued and secure. This will allow for increased productivity, job satisfaction, and loyalty. Your employees will translate their gratefulness into better customer service and this helps cultivate loyal customers. It’s a win-win!