Rigorous programs impact students’ lives.
Not all financial education programs are created equal. A graduation requirement ensures that all students receive education on this crucial topic. This is imperative since requirements have been effective in changing financial behavior and are a tool to help close the gap in knowledge that results from socioeconomic inequalities.
A research study published by FINRA Investor Education Foundation revealed that financial education mandates do positively impact behavior. Georgia, Texas, and Idaho passed mandates around 2003 and 2004 that required financial education for graduation and included at least a half-year course in personal finance. The mandates varied somewhat; for example, Georgia required testing while Idaho did not. However, all included curriculum standards, model curriculum, and courses required for graduation. Students from all three states who took the personal finance course as a graduation requirement showed improved credit scores and lower likelihood of becoming delinquent on credit accounts after graduation. This study also revealed an important point about implementation: Some students in the first cohort to graduate with the requirement in place had small or even negative effects, indicating that financial education programs need to be given time to show their effects. Both teachers and students need time to adjust to changes in curriculum.
Research by authors Olivia S. Mitchell and Annamaria Lusardi shows that financial literacy levels are alarmingly low in the U.S., in particular among economically vulnerable populations. When individuals make poor financial decisions, they are likely to get into financial trouble, and this leads to higher fees and debt that becomes increasingly difficult to pay off. This difficulty inevitably spills over to families and in turn to the rest of the economy. Consequences of financial illiteracy can be more severe for low-income households. Providing equal opportunities for financial knowledge acquisition in school can give all young people the skills that are necessary for sound financial decision making and for successfully meeting today’s financial responsibilities. Equal access to financial education has the potential to help close the wealth gap.
Kentucky passed House Bill 132 in 2018. This bill requires a financial literacy course for high school graduation, which will start with the incoming class for the 2020-2021 school year. This bill is a great achievement for financial education, however this case shows that policy change can take time.
Financial literacy concepts were originally included within Kentucky Academic Standards for vocational studies. The vocational studies’ academic standards, provided by the Kentucky Department of Education, included five big ideas, one of which was financial literacy. This big idea included having the ability to make effective consumer decisions and evaluate and use resources.
How to implement these standards and include financial literacy topics was left to the district’s discretion. While districts could offer the instruction as an elective or integrate topics into other courses, there was no standard that dictated how courses were taught, and not every student had the opportunity to receive instruction.
In 2013, the adoption of House Resolution 25 encouraged the Kentucky Board of Education to require financial literacy, but no mandates were introduced. In 2014, multiple bills relating to financial literacy were introduced. House Bill 77 was introduced to require a half credit in financial literacy for graduation, and while it passed the house, it did not become law. Another bill was introduced that required students to receive instruction in financial literacy as part of existing curriculum and that delayed the requirement until the 2015–16 school year. Additional bills were introduced to require a course in financial literacy in 2016 and 2017.
It was not until 2018 that House Bill 132 was introduced, which required Kentucky’s Department of Education to develop academic standards for a financial literacy program and make completion of that program a graduation requirement.
This case shows that policy change can take time. However, it also shows that a graduation requirement is possible and that more states are recognizing the importance of school-based financial education.
