Teaching the Kids About Money

Americans in general are financially illiterate. Even people who are financially secure often arrived there by accident and make a lot of mistakes about finances. For years, the academic world’s been studying this situation and looking for better ways to teach youngsters about money. Here’s a story about one result. (Subscription might be required.) Their findings are that we should teach children about finances in particular. They’ll forget most of what they learn by the time they actually need it. (Plus, things might be different by then, I think.) Instead, we should do a better job of teaching math and arithmetic. It’s not clear why, but the professors theorize that money decisions involve math, and people who are more comfortable with and proficient in math will make better decisions.

Other academic research I’ve seen indicates that personal finance instruction only works when it is presented about the time a person will need it. They say, teach about college loans and some other things in the last years of high school. Teach about debt management and saving just before a person leaves school for the work force, and so on. Another important conclusion is that students should be receiving a lot of their financial education at home from their parents.

So, the professor of finance at Harvard Business School wondered, if widespread financial education were really effective, why are so many young people struggling with debt, foreclosure and low asset accumulation? He and a group of researchers set out to find an answer. They looked at the states that mandated personal-finance curriculums in high school, and compared the financial health of students who graduated before the mandates to those who graduated after. Their hypothesis: If personal-finance education worked, the students who graduated after the programs were implemented would be better off financially.

They weren’t. After controlling for state, age, race, time and sex, and analyzing a huge pool of historical financial data, the group found that there was no statistically significant difference between people who graduated within a 15-year span either before or after the personal-finance programs were implemented. Graduates’ asset accumulation and credit management were the same, with or without mandated financial education.