This time last year, there wasn’t a state in the union that could ace a financial literacy test. But now, five states have As — one of them even getting an A+.
While Utah is at the top, Alabama, Missouri, Tennessee and Virginia got As this year from Champlain College’s 2017 National Report Card.
To minimize the impact of any future recession or financial crisis, Americans must be educated in personal finance. A great place to start is with our students,” the report card says. “In too many of our states, our youth receive little, if any, personal finance training in elementary school, middle school, high school, and college.”
The good news is that financial literacy is up, even though it’s got quite a long way to go if it needs to be the norm. The five states that got As require high school students to take a standalone course in personal finance. Since the 2015 report card, more states have passed laws about educating young people in financial literacy, like:
- Arkansas passed a law that will require more substantive personal finance education in high school, beginning with the class of 2021.
- Texas requires all high schools to offer Personal Financial Literacy as a half-year social studies elective course.
- Personal finance standards are now six of the 16 total standards for economics in Illinois.
- Nevada recently passed legislation that would require high schools to use more robust financial literacy standards.
Even though there were great improvements, there are some states that aren’t doing so well.
“Unfortunately, Louisiana abandoned its mandatory personal finance education requirement, and Idaho reduced the number of class hours required for the subject,” the report says. “Louisiana is the only state since the 2008 financial crisis that has materially reduced personal finance education standards for high school students.”
Having less financial education is like giving a teenager a car without passing a driver’s test.
“We would not allow a young person to get in the driver’s seat of a car without requiring driver’s education, and yet we allow our youth to enter the complex financial world without any related education,” the report says. “An uneducated individual armed with a credit card, a student loan and access to a mortgage can be nearly as dangerous to themselves and their community as a person with no training behind the wheel of a car.”
Due to the lack of education in financial literacy, it shouldn’t come as a surprise that most Americans don’t have a financial plan. If there’s one place you really shouldn’t wing it, it’s your money. But the majority of us know we aren’t financially literate — even though we aren’t doing anything about it.
The Champlain report tells us this, while also advising us to be more cognizant of credit usage, smart investing, and stashing away money for retirement. The more we know and the earlier we know it, the more equipped we are to handle our finances long-term.
Young Americans might be some of the worst offenders — they are failing basic money tests. But their parents are to blame, since they don’t know enough about personal finance to talk to their kids about it. Bad habits are continuing to be passed down through generations, making more of us less knowledgeable about how to handle money.
We should be more upset that we don’t know enough about how to handle our money (but we aren’t). While the Champlain study is good news for some states, it’s not good enough news. We need accessible financial literacy help, and we need it now.