By Amy Rosen, President & CEO of Network for Teaching Entrepreneurship (NFTE).
There are many things we expect young people to learn.
To give them the best possible chance in a shrinking job market, we want students to focus on STEM subjects – science, technology, engineering and math. We also expect them to be good writers. Demonstrate good social skills and manners. And, dear to my heart, learn an entrepreneurial mindset of ambition, persistence and creativity. And on and on.
Somewhere on that list is financial literacy. We definitely want young people to master the basics of managing their money and making good financial decisions. But wherever you’d place financial literacy on the education priority list, I’d argue it should be a few notches higher than where it is.
How many young people in America know, for example, that it’s best to pay off higher interest debt first regardless of the amount owed? That the relevant number isn’t the total balance but the amount of money you’re putting towards the debt. For example, the same $1,000 towards a $10,000 credit card debt at 10% interest would save you over $6,000 over the life of the loan but less than $2,000 if put towards a $200,000 mortgage at 3% interest. (credit: Financial Finesse, Forbes)
I’d be willing to wager not even many adults knew that one. That’s a problem.
Personal finance is one area in which, without question, ignorance is not bliss. What can we do about it? What can be done to make sure all of us – adults and young people alike – are more literate and wiser in our personal financial affairs? There’s the obvious – join the chorus of those highlighting the need for more and better financial education. Find out how to support the Council for Economic Education and similar groups. Make sure your school leaders know how important teaching financial literacy is to you. As a member of the President’s Advisory Council on Financial Capability for Young Americans, we’re doing that as well as working on other things to raise the profile of financial literacy.
But there are other things you can do – especially if you’re a parent. I’d suggested one: if you haven’t done your taxes yet and you have school-age children, do it with them. Let them see how money is managed and spent and what saving and spending over a year or means. Modeling good behavior – even in tax season – is a good habit.
There are also policy changes which could help. One suggestion I read recently is requiring a financial literacy class as a condition of getting a federally-secured student loan. And while that overlooks those who don’t go to college, it’s a good start. If someone is taking on debt, we’re all should care if that person understands the basics of money management.
Virtually everyone agrees that incorporating financial literacy in our k-12 classrooms makes sense too. While it cannot and should not squeeze out career readiness classes such at STEM, there’s room for both.
If we’re going to invest in making sure today’s young people can get good jobs tomorrow, and we should, we should also invest in making sure they know what to do with those paychecks.