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Teaching the next gen financial literacy
Your Money
Taking a financial education class in high school does pay off.
In fact, there is a lifetime benefit of roughly $100,000 per student from completing a one-semester course in personal finance, according to a recent report by consulting firm Tyton Partners and Next Gen Personal Finance, a nonprofitfocused on providing financial education to middle and high school students.
Much of that financial value comes from learning how to avoid high-interest credit card debt and leveraging better credit scores to secure preferential borrowing rates for key expenses, such as insurance, auto loans and home mortgages, according to Tim Ranzetta, co-founder and CEO of Next Gen.
But then there is the ripple effect, he added.
"Students bring these lessons home," Ranzetta said. "When you take that $100,000 in savings and multiply it across families and communities, it's an incredible economic engine."
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"I get to show students the value of having a savings and checking account and then they are able to share that with their parents," said Kerri Herrild, who has been teaching personal finance at De Pere High School in Wisconsin for 18 years, referring to what's known as the "trickle up effect."
"Getting this basic knowledge — that's powerful," she said.
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Making the grade in financial literacy: More states require students to take personal finance course
Squawk Box
Meanwhile, the trend toward in-school personal finance classes is gaining steam.
As of 2024, half of all states already require or are in the process of requiring high school students to take a personal finance course before graduating, according to the latest data fromNext Gen.
In addition, there are another 35 personal finance educationbills pending in 15 states, according to Next Gen'sbill tracker.
'The research is overwhelming'
Many studies show there is a strong connection between financial literacy and financial well-being.
"The research is overwhelming," Ranzetta said.
Students who are required to take personal finance courses starting from a young age aremore likely to tap lower-cost loans and grants when it comes to paying for collegeand less likely to rely on private loans or high-interest credit cards, according to a study by Christiana Stoddard and Carly Urban for the National Endowment for Financial Education.
Students are also even more likely to enroll in college when they areaware of thefinancial resources available to help them pay for it.
"Our results show that high school financial education graduation requirements can significantly impact key student financial behaviors," the authors said in the report.
Further, students with a financial literacy course under their belt havebetter average credit scores and lower debt delinquency ratesas young adults, according to data from the Financial Industry Regulatory Authority's Investor Education Foundation, which seeks to promote financial education.
In addition, a report by theBrookings Institutionfound that teenage financial literacy is positively correlated with asset accumulation andnet worthby age 25.
I tell them this is going to be the most important class they are going to take in their life.
Christopher Jackson
personal finance teacher at DaVinci Communications School
"I start off my class by telling them that my No. 1 goal is to affect their children's children," said Christopher Jackson, who teaches personal finance to 12th graders at DaVinci Communications High School in Southern California.
"I tell them this is going to be the most important class they are going to take in their life," Jackson added.
As part of Jackson's course, students open Roth individual retirement accounts with an initial grant of $100, which many then maintain on their own.
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Among adults, those with greater financial literacy find it easier to make ends meet in a typical month, are more likely to make loan payments in full and on time and less likely to be constrained by debt or be considered financially fragile.
They are also more likely to save and plan for retirement, according to data from theTIAA Institute-GFLEC Personal Finance Indexbased on research over several years.
"The need is real, the effect is real, and it motivates me as a teacher," Jackson said.
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