How Schools Set Kids Up to Fail Financially

My college friends and I often say half-jokingly that our liberal arts university taught us nothing useful. Sure, we have an endless trove of topics to discuss at cocktail parties, but I haven't been to one of those ... well, ever. When it comes to real-world skills like financial literacy, I've had no education whatsoever. It's little wonder that my financial skills begin and end at checking my bank account online every couple of weeks to make sure I'm not out of money.

There's a growing call to teach basic financial skills to kids and young adults, from elementary school to college, a movement that has not received nearly the attention it deserves. After all, giving kids a strong financial background could literally keep them out of poverty as adults. Why isn't this mandatory in every public school and university in the country?

There are dozens of factors that can push someone into poverty, many of them completely out of people's control (an abrupt job loss or a sudden illness, just to name two). But there is little doubt that not knowing how to handle money is a significant part of the equation for many people. Credit card debt, rent or mortgage payments and other bills can mount quickly, leaving someone on the brink before they know what's hit them. When credit card companies wave "special offers" in 18-year-olds' faces, they generally don't educate them on interest rates and the danger involved in paying the minimum each month. Plenty of highly educated people have written books about the mistakes that led them to financial ruin, leaving readers to wonder whether anyone ever taught them how to live within their means. And the importance of financial literacy goes beyond the personal level: a Canadian study found that it's actually key to the stability of the entire global financial system.

Statistics show that I'm hardly alone in my limited financial knowledge. High school seniors averaged a 48 percent score on a financial literacy test in 2008. And a 2007 survey by Charles Schwab found that while 70 percent of parents taught their kids how to do the laundry, just 34 percent had taught them to balance a checkbook and 29 percent had taught them about credit card fees and interest rates.

Fixing this massive problem won't be as simply as mandating financial literacy classes in school, because the teachers don't know anything about it either. Less than 20 percent of teachers said they felt "very competent" to teach in any one of six areas: income and careers; planning and money management; credit and debt; financial responsibility and decision-making; saving and investing; and risk management and insurance. The first step is to start bringing financial education to the people who are planning to teach through their college or teacher training programs. Then governments can require that they bring those subjects to the younger generations.

Photo credit: BigBeaks