Tuesday, September 26, 2023

Should We Be Teaching Finance in High Schools?

August 18, 2016 by  
Filed under Education, Money/Business, Weekly Columns

(Akiit.comFinancial stress is taking a massive toll on people all across the country. This, of course, has a lot to do with a lack of money and ever-rising costs of living. But a lot of it could come down to a lack of understanding of the intricacies of personal finance and taxes. Indeed, such a lack of understanding may even have caused the inability to keep up in the first place.

So should we start teaching this sort of stuff to high school kids? Is there a desire for personal finance to be on educational curriculums?

Civic responsibility

Filing and paying taxes comfortably falls into the area of civic responsibility. Other things which are considered civic responsibilities are following the law and jury duty. (Voting in elections are also considered a civic responsibility. Though obviously this is something that’s completely voluntary!) Now, it would be easy to say that, traditionally, it should be the parents or guardians who teach a child civic responsibilities. Indeed, this is the argument that is often used when we talk about teaching civic responsibilities in schools.

And it’s understandable that parents would happy to talk to their children about something like law compliance. But when it comes to finances – and, more specifically, taxes – things get a bit more complex. After all, how many parents really know all the intricacies of such financial obligations?

One of the problems in this area is that civic responsibility often treads into deeply moral territory. To teach it is to teach good citizenship. And that, perhaps, is why so many people begin to feel a little uncomfortable with it. After all, which many of us are good, we all have slightly different moral compasses. To allow a child to be taught morals at a school presents a problem for parents across the college-students-2016various spectrums. One religion may have different moral views to another, and atheists are sure to have differing views on the matter. Political views, too, will come into it. Democratic, Republican, and Libertarian parents will have differing views on these areas of morality. To add a uniform way of teaching civic responsibilities to a national curriculum would create a whole heap of controversy.

The trick here, in my opinion, is to teach the financial areas independent of their roles in civic responsibilities. Perhaps parents should discuss the moral intricacies of tax and other money matters with their children. But things like taxes are certainties, whether you agree with them or not. So an amoral teaching of how to deal with them becomes quite an attractive proposition.

Why economics and finance are not the same thing

Many would also argue that many children are taught economics at high school or college. The problem with this argument is that economics and finance are not the same thing. Indeed, the misconception that they are can lead some people into trouble. Someone who enters an economics course at college may expect to come out a financial wizard. But this simply isn’t true. Someone could graduate summa cum laude in economics at college and be the worst at navigating their own finance.

This all stems from a misunderstanding of what economics really is. Economics isn’t really a general “money” subject. Economics is a branch of social science that rarely delves into specifics about money or social responsibility. Economics is more about politics and sociology than it is about finance. The aim is to understand how producers and consumer will act in changing economic conditions. It is, of course, a fascinating subject in its own right. But it’s not going to teach you how to deal with your own finances. It may help people who are looking to become investors. This is because economics will teach you about the various ramifications of government policy on business.

Finance, on the other hands, deals with the value of money, financial structures, and risk. It has much less to do with various theories and more about practice. It is the science of managing funds. The branches of economics include macro and micro economics. But finance will include personal finance. And that, perhaps more than anything, is what we’re looking for here.

A nation of smarter consumers

Take a look at the financial sector. Whatever hardships we’re told it regularly goes through, they never seem to be doing too bad.

Many of the things that regular citizens engage with see the financial sector benefit. And while many citizens will engage with such things, not many can be said to fully understand them. Overdraft fees are something that not many people understand as well as they should. In fact, overdraft fees are often the direct result of not understanding some other financial quality. Many investments turn out to be bad ones, or ones made without full understanding of their implications. This is probably why most investors in this country fail to make a profit. And how many people can comfortably say that they fully understand their retirement funds – things like 401ks? How many people can claim to be confident in telling good loan term from dangerous loan terms?

These things I’ve listed aren’t things that only very few citizens interact with. Most people in this country are going to deal with one or two of those things in their lifetime. Many are going to deal with all of them and more. But failings on the citizen to understand these things still don’t seem to hurt the financial sector very much. In fact, the financial sector often seems to thrive at the expense of regular people.

Of course, the teaching of personal finance doesn’t even have to get that involved to display benefits. At a very basic level, what we’re dealing with here is smarter money management. We don’t have to get into the intricacies of loans or 401ks or investments here. That’s all mid-level stuff compared to everyday spending and budgeting. And, arguably, that basic, everyday stuff is even more important.

To some extent, this is about taking back power. The fact is that financial literacy in America isn’t great. In fact, we’re pretty middle of the pack when you compare us to other OECD countries. That places us below average, with most students and young adults being nearly financially illiterate. In a country of such supposed prosperity, is this really a good look? Is it wise for people to head out of college without fully understanding the intricacies of personal finance?

Becoming more literate in personal finance makes you more powerful in a country so driven by the dollar. A nation of financially-literate young adults is a nation of smarter consumers.

Are we really doomed without it?

Of course, none of this is to say that people are doomed if they don’t know the intricacies of tax laws. After all, we’ve been dealing with a lack of such teaching for decades. Our ability to stay on top of things is due, in large part, to how much help is available. Parents are often more than happy to teach their growing kids about taxes. There are also financial and tax attorneys available who can help people looking to start thriving businesses. If you want to read more, visit AlexanderLawFirmLLC.com.

The legal matters of tax has also proven to be quite the motivator when it comes to self-teaching. However, this eventually becomes teaching by force, and often through trial and error. It’s “pay your taxes or go to jail”. But the efficacy of this approach isn’t easy to judge. Statistics on tax evasion, malicious or accidental, are actually quite hard to come by. These issues do exist, however, which shows either skewed morality or a simple lack of necessary education.

But no, we’re not doomed with personal finance teaching. There is plenty of help available. And it’s not like people like tax attorneys are only used by people who aren’t financially literate. But there’s no doubt that being financially literate would give you an advantage in many walks of life. You can find a useful report on financial education and subsequent behavior at http://www.afcpe.org/assets/pdf/lewis_mandell_linda_schmid_klein.pdf.

So why exactly isn’t it happening?

Well, there are actually states that require personal finance education at high school. The problem is that there are only four of them. They’re Virginia, Utah, Tennessee, and Missouri. All four require high school students to take a personal finance course before graduation. But there doesn’t seem to be any strong moves towards spreading this to other states.

And that’s certainly not for the lack of interest. But when it comes to actual implementation of such courses, we run into some trouble. Most high school teachers simply don’t feel qualified enough to be teaching personal finance courses. And getting the necessary people in would see schools stretch budgets that are already quite stretched. There is also a lack of continuity when it comes to how such a class would be taught.

There’s also the fact that education is, of course, run at a state level. We’re never going to see a nationwide overhaul in this area overnight. Perhaps in the next few years we’ll see one or two more states take on the examples of the four previously mentioned. Learn more about such education in those states at http://www.usnews.com/education/.

So it’s not something that would be easy to achieve. But is it something which would see huge benefits for future generations? I believe so.

Staff Writer; Terry Dean

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