Schools Fail Financial Education Test
Posted on March 30, 2007
A recent survey by the Jump $tart Coalition revealed some shocking statistics. The results printed in a recent issue of the North Carolina Bankers Association Weekly Bulletin show just how dismally education is failing to make the grade when it comes to teaching personal financial requirements. The survey measuring 12th graders’ knowledge of personal finance found that they answered only slightly more than 50% of the questions correctly. Roughly 65% failed the exam while only 6% scored a C or better.
This is a clear indication that young adults are being sent into the world without the basic knowledge required to make critical financial decisions affecting their lives. What’s even more shocking is the fact that the public isn’t outraged at this failure of the education system.
On January 8, 2002, President Bush signed into law the No Child Left Behind Act. It cited as a major challenge the fact that America’s schools are not producing the math excellence required for global economic leadership and homeland security in the 21st Century. The truth is they aren’t even producing the personal financial skills needed to compete in the local neighborhood economy.
The act required states to fill the nation’s classrooms with teachers who are knowledgeable and experienced in math and science by 2005 and supported paying math and science teachers more to help attract experience and excellence. More than half of the school teachers I have interviewed admit they either can’t or don’t balance their own checking accounts. Most see nothing wrong with carrying balances on their credit cards and do not understand why it is more advantageous to save and pay cash for large purchases instead of financing them. No wonder so many young adults graduate high school without the ability to handle their personal finances and soon find themselves buried in debt.
Teaching the advanced math proficiencies required to compete in a global economy is an admirable goal, but is reaching it worth skipping the fundamental math skills required to run a household? Every adult, whether an eighth grade dropout or one who holds an advanced college degree, needs to know how to manage money, pay their bills, plan for the future and hopefully encourage their children to do likewise. Without these skills, most will face financial struggles all their lives. The problem is, until the public demands that these competencies become an important part of the curriculum, its not going to happen.
Public school teachers readily admit that consumer math is not part of the end of grade testing upon which they are judged. Why? Why are the basic fundamentals that are universally applicable to all adults, regardless of social status, neglected in order to teach advanced skills many students will never see once they leave school? The fact that financial problems are the leading cause of divorce is just one more reason they should not be neglected.
The personal saving rate for American’s has dipped into negative territory for the first time since the Great Depression. A slight drop to minus .05% in 2005 was followed by an even greater drop to more than 1% in 2006.
Only twice before, in 1932 and 1933, years when the country was struggling to overcome the Great Depression, did Americans spend more than their after tax income for an entire year. (More on this later.) Personally, I believe we are seeing just the beginning of the negative effects of the failure to teach financial management. Many adults, especially younger ones, simply do not understand the negative effects of consumer debt and are spending everything they make plus going in debt to buy new cars, boats, expensive electronic gadgets and other high ticket items.
It seems the prevailing attitude today is, spend now and let tomorrow take care of its self. A surprising number of the people with whom I’ve discussed the importance of planning for the future, have told me that saving is not that important. They say why sacrifice today when there is no guarantee of tomorrow. Unless schools start teaching consumer mathematics and financial planning, it’s going to be increasingly difficult for young people to distinguish between a selfish “live for today as if there will be no tomorrow” mentality and that of “live today as if there will be a tomorrow and plan for it.”
Here’s a tip! Observe the people you are around who are approaching retirement age. Which of them are happy and financially secure? Of these, you can bet that unless they were born into wealth, they started years before saving and investing and planning for the time when they would no longer be able to work and earn. The rest are probably griping and complaining about how life isn’t fair or how their company or the government isn’t taking care of them.
Because they’ve never been taught differently, most people who struggle can’t comprehend that the reason those facing their later years happy and financially secure are doing so is because they planned it that way. Had they learned how to manage money and plan for the future they would know that it’s not luck that secures your future, it’s planning and discipline.
The best things you could do for your children, and for the country, is to stop tolerating an education system that is producing financial illiterates. Get on the phone. Call your elected officials. Demand that no child be left behind without knowing how to how to manage the day to day financial dealings everyone faces.
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