West Virginia has joined the growing list of states that require high school students to take a financial literacy course. The Legislature passed the law last year and the state Department of Education is finalizing the standards that will be implemented next academic year.
A draft of the standards states the course “is designed to develop student understanding and skills in such areas as money management, budgeting, financial goal attainment, credit, insurance, investments, and consumer rights and responsibilities.” There are nearly 100 subcategories from simple tasks like balancing a checking account to more complicated issues like various types of loans and payment scenarios.
These will be invaluable lessons for young West Virginians as they prepare to enter the complicated and risky world of personal finance. According to Champlain College Center for Financial Literacy, “Young people often do not understand debit and credit cards, mortgages, banking, investment and insurance products and services, payday lending, auto title loans, rent-to-own products, credit reports, credit scores,” on and on.
The TIAA Institute-GFLEC Personal Finance Index for 2023 found that not understanding money, budgets, credit, loans and savings can be costly. For example, individuals with very low financial literacy are:
More than four times as likely to have difficulty making ends meet.
Nearly three times as likely to be debt constrained.
More than four times as likely to lack emergency savings sufficient to cover one month of living expenses.
These issues are particularly acute in West Virginia, which is already one of the poorest states in the nation. The Champlain College Center reports, “students from underprivileged backgrounds enter adulthood with insufficient knowledge of personal finance, which continues the cycle of poverty and inequality.”
Those financial challenges can extend through an individual’s entire life. Public sector workers typically have retirement plans, but the U.S. Bureau of Labor Statistics reports that only 15% of private industry workers had defined benefit plans.
That means the rest must be consciously and consistently saving for retirement. That is a lesson not everyone learns early in their working life, but it pays dividends. According to Business Insider, “If two people save $100 a month for retirement, but one starts at 25 and the other at 35, the early saver will have nearly twice as much by age 65.”
Hopefully somewhere in the financial literacy class, the teacher will explain the miracle of compounding interest!
Young people can get deeply in debt before they know it. Business Insider reports that 18- to 26-year-olds (Gen Z) had an average debt of nearly $30,000 in 2023. That is up more than $4,000 from the year before, and that is before many have taken on a home mortgage.
Yes, children can learn about finances from their parents, but they are not all well qualified to give the best advice. The TIAA Institute reports that for the last seven years, about half of the adults it questioned fell into the category of “generally poor level of financial literacy.”
Granted, it is already a supreme challenge for our educators to cover all the material necessary to graduate students prepared for what comes next, and the financial literacy course is one more thing. But it is evident that being financially illiterate can have life-long consequences.
