Preferential access to concert ticket presales and exclusive entrances at popular venues are just two of the ways credit card companies try to entice young people to sign up for their first credit card. Drawn in by benefits such as cash advances, many are not aware of looming consequences like high annual fees or steep interest rates on debt.
A 2022 survey by U.S. News & World Report found that almost half of college students have credit card debt with nearly a quarter of respondents with debts over $2,000. One way to get kids to swipe their cards more responsibly and make better financial decisions overall is financial education. Students from states with high school financial education requirements were 21% less likely to carry a balance on a credit card during college, according to a 2018 economic analysis. Personal finance classes are on the rise with more states making these classes mandatory for graduation. Since 2019, the number of states that guarantee a personal finance course has tripled from six to 18.
“Teachers are eager to teach this course because of the level of engagement they see from their students, because nobody leaves their classroom saying, ‘How am I going to use this in my real life?’ Every day they’re walking out with something that they can bring back to their families or something they can implement in their own lives,” said Tim Ranzetta, who taught personal finance to high schoolers at Eastside College Prep in California. He co-founded Next Gen Personal Finance (NGPF), a nonprofit organization that provides personal finance curriculum and professional development for middle and high school teachers. Ranzetta recommends that teachers follow the four Cs – current, comprehensive, customizable and curated – to create effective personal finance classes that equip students with the skills needed to manage their finances in the real world.
A good personal finance class ensures that students are learning topics relevant to current life, not financial wisdom from a decade ago, according to Ranzetta. “If we’re not talking about current topics, we’re going to lose kids,” he said.
Current financial topics that weren’t popular even a few years ago include cryptocurrency and non-fungible tokens (NFTs). Additionally, Ranzetta has seen sports betting become widely available with nearly half of states now offering online sports betting from mobile phones. Between 60% and 80% of high school students report having gambled for money in the past year, according to the National Council on Problem Gambling. Young men and teen boys are particularly susceptible to gambling and risky behaviors.
Ranzetta recommends that teachers incorporate explainers about financial topics in the news into a weekly lesson. For example, Tara Razi, a teacher at San Marcos High School who uses NGPF’s curriculum, brought an article to her personal finance class about “buy now, pay later,” a newly popular payment practice that allows consumers to make a purchase immediately and pay it off in installments. “I always try to keep things relevant and up to date,” she said during a California Department of Education presentation on the benefits of financial literacy. “‘Buy now, pay later’ is becoming such a big thing in our society because people are financially hurting post-pandemic with inflation.”
Additionally, NGPF offers a weekly financial current events quiz game and explainer video called FinCap Friday designed for classroom use.
Ranzetta said quality personal finance classes should cover a broad range of topics, including budgeting, investing, credit management and behavioral economics. From their first paycheck at a part-time job to accessing their retirement account, comprehensive financial literacy classes are designed to prepare students to manage money throughout all life stages and career trajectories.
While almost all states have adopted content standards that include personal finance, they don’t all require teaching the subject. Consequently, financial education can take a backseat to other requirements.
To address this issue, some schools are integrating personal finance education into existing curricula. For example, the K-6 program, Everyday Math, teaches students how to use math to solve practical financial problems, such as making change and counting with tally marks. At the high school level, standalone financial literacy classes are more common because students are starting to make their own financial decisions.
In a randomized control study conducted in Italy, students who took an instructor-led financial literacy class and students who took a similar online course showed increased financial literacy compared to a control group. But three months later, the effects persisted only for students in the instructor-led course.
“The thing about having 25 students in front of you in a personal finance class is every one of them has had a different experience with money,” said Ranzetta. “Ultimately, we’re shaped by our own experiences.” Ranzetta encourages teachers to tailor financial literacy lessons to their students so they can apply what they know to their real life financial decisions.
For instance, financial literacy education can cater to college-bound students who may not get the support they need at home or at college and career offices. According to the National Association for College Admission Counseling, only 28% of public schools employ at least one counselor with the exclusive responsibility of college counseling. “There’s a certain percentage of kids who are like, ‘This isn’t for me. I can’t possibly afford this, not recognizing that they may actually qualify for significant amounts of financial aid,” said Ranzetta.
Tara Razi’s students at San Marcos High School can schedule a time to meet with her and get hands-on support with their finances. One student, for example, asked Razi for step-by-step guidance in transferring money from a checking account to a savings account. Additionally, if students feel prepared after the credit management unit and get written permission from their parents, she will walk them through signing up for a credit card.
Students have access to abundant financial information online, but they aren’t always great at recognizing misinformation. “You have access to all the world’s information, which is great, but it’s also a curse,” said Ranzetta. It’s increasingly important to provide financial literacy at school that is based on advice from knowledgeable experts.
Parents are often students’ first financial literacy teachers. However, a recent survey by CNBC shows that only 15% of parents said they spoke with their children more than once a week about household finances. “If they’re not getting it from parents and they’re not getting it from schools, they’re getting it from TikTok,” said Ranzetta. “They need to have the foundational knowledge to say, ‘Is this good advice or bad advice?”
While personal finance classes won’t explicitly tell students exactly what choices to make with their money, quality financial education can help them understand their options.