Our schools can’t afford to leave financial literacy as an afterthought

Many young people are concerned about their financial futures — understandable, given today’s economic climate, with concerns about inflation, high interest rates, rising home prices, and uncertainty about AI’s impact on jobs.

Now more than ever, it is imperative that we make basic financial literacy a national priority. To deliver on that priority we need greater collaboration and more resources for financial literacy programs. It is possible to give our next generation the tools and support they need to have successful futures, but policy makers, educators and industry must work together.  

The good news is that we are seeing increased efforts to teach these skills. Teenagers learning about portfolios and markets has become a key part of those lessons. Teaching young people how to invest is only part of financial literacy education, but it goes hand in hand with teaching them about spending wisely, saving and avoiding debt.

This year, 6,500 students participated in the Capitol Hill Challenge program, which pairs members of Congress with high-needs public schools in every congressional district to teach students about capital markets and basic money management. Then they put theory into practice by managing hypothetical $100,000 portfolios of stocks, bonds, mutual funds and cash. Since its inception in 2004, the program has matched more than 7,500 teams with senators and representatives, reaching more than 170,000 youth.

Many young adults begin their financial journeys without adequate knowledge, which can have lifelong implications. Programs like the Capitol Hill Challenge empower students with the skills to build wealth through investing, creating a ripple effect of financial stability for themselves, their families and their communities. Educators, members of Congress and financial services professionals recognize the need to instill these habits at an early age and consequently work to bring programs like this one into our schools.

Although we have made progress on financial education in recent years, much more needs to be done. In a recent analysis, Stanford economist Annamaria Lusardi found that less than 30 percent of Americans can correctly answer three basic questions about personal finance showing a rudimentary grasp of such fundamental ideas as interest, inflation and diversification of investments.

Lusardi’s research has concluded that people who understand basic financial concepts “save more for retirement, make smarter investment decisions, and manage their debts more effectively.” Yet financial literacy is both “low” and “unevenly distributed,” with young people, racial minorities and those without college degrees among the least financially literate.

The 2023 TIAA Institute-GFLEC Personal Finance Index likewise found that financial literacy is particularly low among the young. Of the index’s 28 basic finance questions, an alarming 37 percent of Gen Z and 30 percent of Millennials could correctly answer fewer than seven; the average U.S. adult can correctly answer 13 of them.

Currently, 35 states require high school students to take a course in personal finance to graduate. Although this represents progress, financial literacy needs to be a requirement in all 50 states. To support these state requirements, we must commit resources to have enough trained educators and provide them the necessary tools to deliver these curricula to students. The industry cannot do this alone.

Access to these courses is vital. According to a study for the Economics of Education Review, “financial education requirements are associated with fewer defaults and higher credit scores among young adults.” 

Along with the increasing requirements at the state level, national leadership is required. Members of Congress and the administration should take every opportunity to promote the importance of financial education. The bipartisan leadership of members such as Reps. Young Kim (R-Calif.) and Joyce Beatty (D-Ohio), who co-chair the Financial Literacy and Wealth Creation Caucus, has been vital. They, like many of their colleagues, have worked with schools in their districts and have widely promoted financial literacy and connected it to building wealth. 

Beatty put it well when she said that “financial literacy is not only for economic stability, but also for wealth building and lasting prosperity for generations to come.”

Congress has passed legislation to declare a “financial literacy month” which highlights the issue as a national priority. In addition, members have introduced various bills that provide grants toward financial literacy programs; include financial literacy as a graduation requirement in high schools operated by the Department of Defense; and provide discounts to FHA mortgage premiums for completing a financial education counseling course. These are all important steps to add the resources needed to provide greater access to financial education but are just the beginning.

While it may not get the attention of many other high-profile issues, financial literacy is one of the most important challenges we face as a nation, and one that can directly impact our long-term growth and prosperity. Educators, the private sector, and elected officials must continue collaborating to deliver these skills.

In addition, we must devote the resources necessary to equip our next generation with the knowledge and skills they need to manage their money. Financial literacy is too important for our future to be an afterthought in our schools.

Lisa Hunt is managing director and head of International Services for Charles Schwab. She is member of the Charles Schwab Foundation board of directors and vice chair of the SIFMA Foundation board of directors. The Capitol Hill Challenge program is run by the SIFMA Foundation and underwritten by the Charles Schwab Foundation.