Financial Literacy Education for High School Students
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Financial Literacy Gaps
The Push To Mandate Financial Literacy Education for High School Students
The increasing complexity of the financial landscape has amplified the need for robust financial literacy among individuals, particularly young adults transitioning from high school to independence. Financial literacy, encompassing the knowledge and skills required to make informed and effective financial decisions, is recognized as a critical component for achieving financial stability and success. However, there is a concern that current educational systems are not adequately preparing students with the necessary financial acumen to navigate adult life.
This literature review aims to explore the existing body of research on financial literacy education and its impacts, with a particular focus on high school students. It will examine the importance of financial literacy in today's rapidly evolving world and assess the current state of financial knowledge among high school students. By reviewing scholarly articles, books, and studies from various educational organizations, this section will provide a comprehensive understanding of the impact and necessity of financial literacy education.
Background to the Problem
The term "financial literacy" traditionally refers to the knowledge of financial concepts and procedures. It also means understanding money topics ranging from income, budgeting, saving and investing, as well as how interest rates work and why credit scores matter (O’Brian, 2023). According to the OECD (Atkins & Messy, 2014), financial literacy, financial capability, which indicates the skills needed to apply this knowledge, and financial inclusion which signifies the opportunity to do so, are combined into a single concept of financial literacy. This unified concept encompasses the knowledge and understanding of financial concepts and risks, along with the skills, motivation, and confidence to apply such knowledge. The goal is to make effective decisions across various financial contexts, enhance the financial well-being of individuals and society, and enable participation in economic life.
Many high school graduates lack fundamental financial knowledge, such as understanding credit, loans, budgeting, and savings (O’Brien, 2013). In 2020, the TIAA Institute-GFLEC Personal Finance index, revealed that adults who answered the annual survey about money topics scored an average of 52% on the assessment. In 2024, the same survey reported participants scored an average of 48%. As the below images shows, there is a deficiency with financial literacy education.
This deficiency can lead to poor financial decisions, resulting in long-term detrimental effects such as high levels of debt, inadequate savings, and financial instability. As young adults embark on their journeys into higher education, the workforce, and independent living, the consequences of financial illiteracy can be profound and far-reaching.
Several factors contribute to the inadequacy of financial education in high schools. Traditional curricula often prioritize subjects deemed essential for standardized testing and college readiness, such as mathematics, science, and language arts, while neglecting practical life skills, including financial literacy. Additionally, educators may lack the necessary training and resources to effectively teach financial concepts, further exacerbating the problem.
Research indicates that students who receive financial literacy education can be better equipped to make informed financial decisions, manage their money effectively, and achieve long-term financial goals (Yates & Ward, 2011). Despite this, financial education programs are not uniformly implemented across schools, leading to significant disparities in financial knowledge among students (Ramsey, 2024).
The urgency of addressing this issue is underscored by the rapidly changing economic environment. Technological advancements, the rise of digital currencies, and the increasing complexity of financial products necessitate a higher level of financial literacy than ever before. Moreover, the economic repercussions of global events, such as the COVID-19 pandemic, have highlighted the importance of financial preparedness and resilience.
References:
Atkinson A, Messy F (2012) Measuring financial literacy: Results of the OECD / International Network on Financial Education (INFE) Pilot Study. OECD Working Papers on Finance, Insurance and Private Pensions, No. 15. Paris: OECD Publishing.
O’Brien, S. (2023). Lack of financial literacy cost 15% of adults at least $10,000 in 2022. Here’s how the rest fared. CNBC. https://www.cnbc.com/2023/01/19/heres-how-much-people-say-lack-of-financial-literacy-cost-in-2022.html
Ramsey. (2023). The Financial Literacy Crisis in America: 2023 Report. Ramsey Solutions. https://www.ramseysolutions.com/financial-literacy/financial-literacy-crisis-in-america
Ramsey. (2024). Which States Require Financial Literacy in High School? Ramsey Solutions. https://www.ramseysolutions.com/financial-literacy/states-require-financial-literacy-in-high-school
Yates, D., & Ward, C. (2011). Financial Literacy: Examining the Knowledge Transfer of Personal Finance from High School to College to Adulthood. American Journal of Business Education, 4(1), 65-78.
Test Your Knowledge Through EverFi’s Online Lessons
*Designate for High School Students
Go To: www.everfi.com/student
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EVERFI is a company that offers digital financial education resources for K-12 students, including a free 101-course Financial Literacy for High School program. The program covers complex financial concepts and real-world scenarios, such as managing credit and debt, financing higher education, applying for financial aid, and establishing credit.
EVERFI's free high school financial literacy course equips students with tools to manage their personal finances in the real world, from applying for financial aid to establishing credit and investing.
Recommended Grade Level 9-12 in the U.S. and Canada
Total Time: 7 lessons, 25-35 minutes each
Subject Fit: Finance, Economics, CTE, Social Studies, Business
Standards Alignment: Jump$tart Standards, State-Based Financial Literacy Standards
Topic Areas
Banking Basics—Students will gain confidence in engaging with financial institutions and picking the right products for their life and financial goals
Income and Employment —Students will feel confident in navigating the choices and paperwork presented when starting a new job.
Budgeting—Students will set short-term and long-term financial goals and create a personal budget that tracks spending.
Consumer Skills—Students will proactively research purchase decisions and select the best way to pay for those purchases.
Credit and Debt—Students will engage in wise debt management practices and avoid expensive borrowing behaviors.
Financing Higher Education—Students will develop a plan for financing postsecondary education or training.
Insurance—Students will become aware of the need for a risk management strategy and how insurance plays a role.
Adopted from EverFi.com
