More and more students are taking training in personal finance. But is it enough?

A teacher talking with a table of students in a school dining hall.

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According to the S&P Global Financial Literacy Survey, 43% of Americans lack financial literacy — and gaps in financial knowledge can lead to chronic money problems. In 2018, only 16.4% of American high school graduates received training in personal finance. The number has now risen to around one in four high school students (22.7%).

As more states make financial education a mandatory part of the high school curriculum, Next Gen Personal Finance estimates that at least one-third (35.1%) of high school students will have taken a course autonomy over personal finances. That still leaves two out of three high school students without the education they need to be financially capable.

More states 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 are beginning to implement personal finance education at the high school level. Personal finance education is defined as a stand-alone personal finance course that lasts at least one semester or 60 consecutive hours of instruction.

Michigan recently passed a bill that would make it the 14th state to guarantee high school students a personal finance course before graduation. Momentum has grown this year, with 26 state legislatures introducing 60 different bills to expand access to personal finance education.

The importance of personal financial education

Personal finance education directly helps people improve their financial well-being. Those with higher financial literacy are less likely to face financial hardship. Those with low financial literacy are:

  • Six times more likely to have difficulty making ends meet.
  • Five times more likely to be unable to cover a month’s living expenses.
  • Four times more likely to spend more than 10 hours a week thinking about 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 adults will use payday loans and is positively correlated with asset accumulation and net worth at age 25.

The Next Gen Personal Finance annual report found that access to personal finance education is still divided based on location, race, and socioeconomic status. Across the country, students do not have equal access to personal finance education. Expanding personal finance education to all segments of society can help close the socio-economic gap and help more people build their savings accounts.

The vast majority of millionaires haven’t inherited their money or earned six-figure incomes. Financial success often hinges on using basic personal finance principles, such as regular and consistent investments 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 develop good habits for the future.

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