Financial Illiteracy Series Part III – education’s shortcomings

If parents aren’t able to teach their children financial literacy, the next logical place to gain this important life skill would be the educational system.  Unfortunately, our system is so focused on core literacy that the topic of personal finance is virtually ignored.  In the end, the roots of education’s shortcomings are not in the skills or abilities of our teachers, but in the policies that our schools have adopted.

The K-12 System

As an example, my children are in the public school system where the state tests students each year to assess their learning in areas such as math, reading, social studies, and the like.  However, they no longer teach or grade handwriting the way they did when I was growing up.  The reason?  Handwriting doesn’t show up on any of the state’s exams.

The same is true of personal finance.  Since basic financial literacy isn’t tested, it isn’t taught, and it certainly isn’t learned.  The policy is to teach core literacy and personal finance simply isn’t part of the curriculum.

Sure, schools teach children how to count and might even have a class in high school dealing with business or economics, but this does very little in the area of financial literacy.  This results in a mean score on basic financial literacy exams of just over 50%.  In other words, we fail.

College Isn’t Much Better

Moving beyond high school, we see that even a college graduate that spent four years at a top flight school is just as likely to be financially illiterate as a high school graduate.  This is understandable for those with majors that don’t have the word ‘finance’ in it, but even a finance major can find themselves lacking in personal finance knowledge.

In reviewing the curriculum for finance majors at a number of colleges in the area, I found that all of them gave only a cursory overview class of personal finance.  The rest was spent on more general business courses and more detailed corporate finance topics.  This is fine for learning to earn an income in corporate finance, but wouldn’t it make sense to fit a detailed treatise of personal finance somewhere in the four year program?  Surely it would deliver more value than some of the electives offered.

Of course, the students in these programs are simply doing what the college or university is telling them to do.  Again, it’s a matter of policy rather than the ability to teach, resources available, or desire of the students to learn.  Students will do what these institutions require of them and little more.

Ultimately, this results in even our ‘brightest’ people going to school, earning a degree, and developing a great base with which to earn an income, but finding themselves in the uneasy position of not knowing what to do with their personal finances once they enter the real world.

Changes are Coming

This needs to change and fortunately for all of us, it is.  Some states and institutions are changing their policies to reflect the reality that personal finance is every bit as important to individuals as any other courses currently offered.  These changes are being implemented in a variety of ways and we’ll no doubt see some missteps along the way.  However, making small changes that give credence to the importance of financial literacy is the way that big problems are solved.


The educational system isn’t where it needs to be with respect to financial literacy.  Our system is among the best in the world at giving its participants the ability to earn a paycheck, but falls flat when it comes to teaching what to do with that income.  Here are some important things to remember about our system and how to improve it:

  1. Fill the Gaps – Assess your child’s curriculum to find what is missing with respect to personal finance and try to fill the gaps
  2. Support Change – If your child’s school is considering adopting personal finance as part of its curriculum, support the changes
  3. Advocate Literacy – Many schools simply won’t make changes until it is mandated, so become an advocate for financial literacy and get involved in the discussion
  4. Ultimately It’s on You – Even if the educational system you grew up in or your child is now in doesn’t do enough with personal finance, remember that it is always up to the individual to seek out the information and skills needed to succeed in life