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Lesson 6.17

Personal Finance:
Learning to Earn

Few California schools teach kids financial skills. Surprised?

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To be ready for life as a grownup, students need some financial skills.

For many years, California schools took an ineffective approach to teaching financial skills. In 2024, the state changed the strategy in a way that should benefit the financial literacy of future generations of Californians. The change will take time. This lesson reviews the background of the issue, the research that compelled change, and some of the things schools can do proactively.

A penny saved is a penny earned

At some level, personal finance is common sense and self-discipline, Ben Franklin-style. A penny saved is a penny earned, right?

Sure, but the economy is full of cheerful businesses, brilliantly marketed, that want to lend you a hand now in exchange for an arm and a leg later. It is easy to walk past some of the most discouraging parts of the financial service economy without even noticing. Over a decade ago, California Governor Gavin Newsom quipped that "the nation has as many check-cashing and payday loan businesses as it does McDonalds and Starbucks Coffee stores combined". In 2022, Pew Charitable Trusts reported that California still had few safeguards to protect borrowers.

These payday advance services are usurous — but for the poor, some banks can be even worse. In 2021 (a good year) about 5% of California households were unbanked, but the rate among those without a high school diploma was much higher — about 17%.

What is financial literacy?

Financial literacy is the capacity to make informed decisions involving money, assets, or debt.

No one is born financially literate. On the path to adulthood, students must acquire the skills they need to support themselves and those they care about.

Society has an enlightened interest in a financially literate public. From a policy perspective, the main vehicle to equip people with basic financial literacy skills is the public education system. Unfortunately, most schools have been ineffective at work of preparing students to understand and navigate their financial self-interest.

California's financial literacy education strategy has been ineffective. But it's changing.

"Weaving" worked weakly

For decades, California expected schools to teach financial skills bit by bit, weaving financial topics into other subjects rather than teaching them explicitly as a separate course. The 2016 California History-Social Science Framework documented the approach. Topics to be covered across multiple courses included budgeting and managing credit, student loans, consumer debt, and identity theft security.

Idealistically, this approach made it every teacher's job to teach financial skills. Practically speaking, it became nobody’s job.

The strategy of weaving financial education across many courses was not effective. In 2022, the Nation's Report Card on Financial Literacy awarded California a grade of D for its approach to teaching financial skills.

In other reviews of financial literacy education among the 50 states, Champlain College awarded California a failing grade. The Council for Economic Education expressed similar concerns.

The costs of financial illiteracy

Financial blunders can have huge consequences for individuals, families and communities. In a much-quoted national survey, respondents blame their own lack of financial knowledge for an average of $1,506 in losses, implying a nationwide shot-in-the-dark total of $388 billion. It's a squishy estimate, but the point is that financial mistakes are common, costly, and preventable. Some of the major costs of financial illiteracy aren't counted in dollars and cents: financial uncertainty is a massive source of stress and conflict.

California's financial literacy education revolution

In 2024, California state legislators chucked the state's ineffective "woven" approach to financial literacy. By the 2026-27 school year, all high schools must provide a semester-length course on personal finance. It will become a statewide graduation requirement for the class of 2031.

This requirement passed into law partly in response to a campaign that threatened to place an initiative measure on the ballot if the legislature failed to act. Implementation details about the new course will be worked out by the state Instructional Quality Commission for approval by the State Board of Education by the end of May 2026.

It can take a long time for changes in an educational framework to be implemented in the specific course offerings or requirements at any given school. In California, textbooks and learning materials are adopted by school districts, which have a lot of power and latitude in how they respond to changes in curriculum frameworks. Changes in curriculum frameworks do not typically result in quick changes or in mandates for school districts to offer or require specific courses.

Schools can get ahead of the coming changes by identifying faculty with an interest in financial education.

Does financial education work?

A course in financial literacy is meant to equip students to make wise choices and help them avoid making costly errors. Does it?

The short answer is yes, but studies suggest that it's important to have realistic expectations. World Bank studies of small financial education interventions have registered only modest effects, for example. Switching to a dedicated course is likely to produce uneven effects depending on how well the curriculum matches the financial context of the students involved. Financial education feels relevant if you have money, or expect to. If you don't, it can feel like preaching or wishful thinking.

In 2019, a study focused specifically on the impact of financial education on African-American college students. The study, which includes a useful rubric, found that effective programs have to include practice to be effective. Theoretical knowledge about personal finance isn't enough.

This lesson concludes chapter 6: "The Right Stuff." The next lesson begins our exploration of "The System." The overall structure of Ed100 is:

Education is Students and Teachers spending Time in Places for learning with the right Stuff in a System with Resources for Success. So Now What?

This lesson was updated in July 2024.

Quiz

Which ONE of the following is TRUE?

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Questions & Comments

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user avatar
Carol Kocivar April 7, 2024 at 2:51 pm
2024 proposed legislation.
SB 342: Financial Literacy Education

SB-342 adjusts the history-social science curriculum framework to include fundamental, age-appropriate instruction on financial literacy for Kindergarten through 12th grade education.
user avatar
Jeff Camp - Founder February 4, 2024 at 5:20 pm
Inside California Education shows what a financial literacy class can look like. Who wouldn't want that class?
user avatar
Jeff Camp - Founder May 22, 2023 at 2:29 pm
Are teachers financially literate?
The FDIC conducted research on this question in 2010. They found that teachers feel confident teaching about financial topics only to the extent they have had personal experiences related to those topics.
user avatar
Jeff Camp - Founder December 9, 2022 at 4:07 pm
A small but growing number of states are requiring personal finance education as a distinct course. For information refer to NextGen Personal Finance. The organization ranks California 44th among the states in terms of student access to financial education.
user avatar
Admin November 17, 2021 at 10:26 am
There is evidence of strong public support for financial literacy education, especially when the question is posed in the absence of alternative priorities. Poll: https://www.financialeducatorscouncil.org/financial-literacy-entrepreneurship-career-education-survey/
user avatar
jroubanis February 22, 2020 at 8:45 pm
Life Skills and Teen Living type courses historically tackled financial literacy in secondary school elective Home Economics (now Family & Consumer Sciences) courses.
user avatar
TOBY BLACK January 21, 2020 at 7:38 pm
Burbank had an amazing High School Econ and Government teacher, Bill North, who made sure that every student who went through his class could properly write a check. He "wove" so many financial lessons into his curriculum.
user avatar
Jamie Kiffel-Alcheh November 16, 2019 at 6:58 am
The article from The New Yorker, about how banks can be worse than check cashing stores, is very interesting. But as it was written in 2013, I wonder what has changed since then.
user avatar
Brett February 25, 2019 at 12:45 pm
This curriculum has been used in other states. Maybe CA students would benefit too.

https://www.ramseyeducation.com/foundations-personal-finance-hs
user avatar
Caryn February 25, 2019 at 1:07 pm
Thanks for chiming in, Brett. Do any of our readers know if this curriculum or any other financial literacy courses are currently being taught in their schools? When you have curriculum concerns or questions, do you know who to ask in your school or district office?
user avatar
smgrussell September 14, 2018 at 2:51 pm
But into "whose" curriculum? Under which course?
user avatar
Caryn September 14, 2018 at 4:06 pm
Hi smgrussell, this is an excellent question and I'm sure our Ed100 readers will have some great suggestions. Readers, do you have any financial literacy courses available at your schools or ideas of which curriculum frameworks should include this important information? According to the PwC Educator Survey in 2015, 92% of K-12 educators nationwide believe financial education should be taught in schools but only 12% do. Cajumpstart.org offers a six session, no cost financial literacy workshop to California educators. Providing teachers with these tools seems like a great way to start!
user avatar
Sonya Hendren August 24, 2018 at 1:27 pm
I went through the California public education system, and I didn't know the field of finance existed until I entered a finance-related field decades later. Econ teachers at every level drilled into us "Economics is not the study of money. Economics is not the study of money." I took it to mean that the money itself is arbitrary, useful only as a concept, trade could be done with tulip bulbs or shells, etc. I thought if I just kept taking enough Econ classes, eventually we would get to stocks and bonds. There was never a hint that finance is a thing, where you can study how money is used, and it exists. That's some obscuration!
It would have made a world of difference if the teachers had been trained to say "Economics is not the study of money. The study of money is called finance, and you can pursue that separately if you like."
user avatar
Lisette October 4, 2017 at 12:28 pm
I fully support teaching our children about financial responsibility. Not all parents teach this to their children and I have seen the consequences in college. Many kids get lured to signing up for credit cards to get a cheap freebie. Then some young-adults make bad choices and it affects their credit for the foreseeable future. I was lucky my parents taught us early-on what to do and not to do. Thank you mom and dad!
user avatar
susan_m_mathews May 28, 2015 at 2:23 pm
We had a highly popular "Personal Law" class at my High School in Ohio in the 1980s. In that class, I learned a lot of personal finance too, including how to write a check and balance a checkbook, how to fill out an income tax return, how to fill out a FAFSA, and and basics of credit. That class helped me feel ready to move out on my own after high school. I have not seen a similar class offered at my children's schools in California.
user avatar
g4joer6 April 20, 2015 at 11:17 am
Good ideas in this lesson. Saving, borrowing, money stuff was not discussed when I was young. Just had to figure it out on my own.
user avatar
digalameda April 5, 2015 at 1:17 pm
I think the perfect class is one quarter each of personal finance, using computer office applications, cooking, and accounting. This would give kids the basics to survive and get a basic job.
user avatar
Mamabear March 26, 2015 at 9:37 pm
Good questions! Is Economics offered in all high schools these days? Seems like a good fit to discuss money matters.
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