More students are getting a personal finance education. But is it enough?

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According to the S&P Global Financial Literacy Survey, 43% of Americans are not financially literate — and gaps in financial knowledge can lead to chronic financial problems. In 2018, only 16.4% of high school students in the United States received an in-person financial education. The number has now risen to about one in four high school students (22.7%).

With more states requiring financial education as part of their high school curricula, Next Gen Personal Finance estimates that at least a third (35.1%) of high school students will take a stand-alone personal finance course. This still leaves two out of three high school students without the education they need to be financially able.

More countries are implementing personal finance requirements

Currently, only eight states require high school students to take a personal finance course: Alabama, Iowa, Mississippi, Missouri, North Carolina, Tennessee, Utah, and Virginia.

Five more states have begun implementing personal finance education at the high school level. A personal finance education is defined as a self-contained personal finance course of at least one semester duration, or 60 consecutive hours of instruction.

Michigan recently passed a bill making it the 14th state to guarantee high school students an in-person financial semester before they graduate. Momentum has increased this year, with 26 state legislatures introducing 60 different bills to expand access to personal finance instructions.

The importance of personal financial education

Personal finance education directly helps people with their financial well-being. Those with higher financial knowledge are less likely to experience financial difficulties. Those with low financial knowledge are:

• Six times more likely to have difficulty making ends meet.
• Five times the probability of not being able to cover one month of living expenses.
• You are four times more likely to spend more than 10 hours a week thinking or dealing with personal finance issues.
• Four times more likely to be dissatisfied with their current financial situation.

Studies also show that personal financial education reduces the likelihood that young people will use payday loans, and is positively associated with asset accumulation and net wealth at age 25. States with mandatory personal finance courses have experienced lower late rates and better credit scores.

Next Gen Personal Finance’s annual report found that access to personal finance education remains broken down based on location, ethnicity, and socioeconomic status. Students across the country do not have equal opportunities to obtain a personal finance education. Expanding personal finance education across all segments of society can help bridge the socioeconomic gap and help more people create their own savings accounts.

The vast majority of millionaires did not inherit their money or achieve a six-figure income. Financial success often depends on using basic personal finance principles such as regular and consistent investing over a long period of time, staying out of debt, and sticking to a budget. Financial education is the key to financial success and can help build good habits for the future.

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