More high schools are requiring financial-literacy classes. The pandemic may have played a key role.

By Andrew Keshner

'COVID made it very clear around the world how unprepared people are to face shock'

The number of high-school students required to receive personal-finance instruction before they graduate is about to increase substantially - and bleak early-pandemic memories could be one factor driving the surge, some financial-literacy experts say.

"The pandemic really pulled the cover off the fact that so many Americans really had no financial resilience, and that really opened people's eyes," said Nan Morrison, the president and CEO of the Council for Economic Education.

"The pandemic certainly hit harder financially in some communities than others," she added. "And when you pass requirements, you get access for every child."

There are now 35 states - including new additions Florida and Pennsylvania - with current or forthcoming rules to make some personal-finance coursework part of high-school graduation requirements, according to a report by Morrison's organization published last week.

That marked a 12-state increase from 2022, when the organization's biennial report counted 23 states with such mandates in place or slated to take effect. Between 2020 and 2022, just two states adopted requirements for personal-finance education.

Twenty states currently require or are poised to require one semester of personal-finance instruction, the most recent report showed, up from nine states in 2022.

The policy push for personal-finance education continues to expand. In Washington, a bill that would require high schoolers to complete half a credit of financial education recently passed the state's House of Representatives. In California, an organization is collecting signatures for a November ballot vote that would mandate that Golden State high schoolers take a one-semester personal-finance class.

"It feels like the boulder has started to roll down the hill very quickly," said Christopher Caltabiano, the Council for Economic Education's chief program officer. To him, the main driver is the growing evidence that classroom instruction on finances helps students' financial lives. As state lawmakers learn about new requirements, he added, there's also a follow-the-leader element.

But the pandemic's impact played a role, even if a secondary one, Caltabiano said.

Millions of people found themselves jobless in 2020 after stay-at-home orders ground many businesses to a halt, and the federal government churned out trillions in relief for families and businesses suddenly unable to pay bills. The government response included three rounds of stimulus checks, enhanced unemployment benefits and a lengthy pause on student-loan payments.

"Everywhere we need this. COVID made it very clear around the world how unprepared people are to face shock," said Annamaria Lusardi, a senior fellow at the Stanford Institute for Economic Policy Research who also teaches a financial-literacy class at Stanford.

Lusardi's research traces the line between financial literacy and financial "fragility" during times of sharp economic distress.

After reviewing survey data from April 2020 and May 2020, Lusardi and her co-authors determined that people who scored higher on three questions about interest rates, inflation and stock diversification were more likely to say they could come up with $2,000 within the next month for an emergency.

The pandemic didn't create the need for more financial literacy, she said - rather, it made clear "the cost of financial illiteracy." That's not a knock on people who lack financial knowledge, Lusardi emphasized. "It's because we don't have it in the schools."

The need for more financial know-how predated the pandemic. Financial literacy was slipping for all demographics, but particularly for 18- to 34-year-olds, according to a 2019 study by the FINRA Investor Education Foundation, the educational arm of the government-authorized nonprofit that regulates the brokerage industry.

When Pennsylvania state Sen. Chris Gebhard, a Republican, sponsored the bill to require a personal-finance course for high schoolers in the state, he wasn't reacting to the pandemic's economic strain, he said.

He's attempting to break the long-running pattern of too many people learning about money "by making the wrong financial decisions and learning by failing." "I think there's a better way to do that," he said.

Still, the pandemic underscored the public's "perilous" financial conditions, he said, and that backdrop may have contributed to support for the bill.

Gebhard's proposal came to fruition as part of an omnibus education-policy bill passed in December. Starting in the 2026-2027 school year, the teens who are ninth graders in all Pennsylvania schools, not just public schools, will need one course in personal finance.

The specifics will vary as school districts decide the curriculum, but Gebhard said the bill points to guidelines that discuss personal-finance fundamentals like budgeting, credit cards, investing and insurance.

Students are entering a complex economy where it's easy to make quick spending and investing decisions by tapping a smartphone, Gebhard said. "We wanted to give them the financial foundation on which they are going build their financial decisions."

As many other products did during the pandemic, financial-literacy classes may face supply-chain challenges.

There aren't enough educators who are sufficiently trained to teach personal finance, according to John Pelletier, the director of Champlain College's Center for Financial Literacy. The center offers a class that instructs teachers on how to teach the topic.

It's common for teachers instructing on financial literacy to have certifications in other topics, including social studies, family and consumer science, business and math, he said.

"If we have this mandated, we have got to make sure these educators get trained. That's where I worry," he said. "My fear is people might see this as a failure without training."

Indeed, "financial education is most effective when there is a rigorous curriculum, a specific course devoted to personal finance (rather than embedding these concepts into other classes), and trained teachers," Lusardi and Olivia Mitchell, a professor at the University of Pennsylvania's Wharton School, wrote in a journal article last fall.

It's also important to provide financial education after high school, including in college and workplaces, "because acquiring financial knowledge is a lifelong process and the crucial financial challenges vary by age," they added.

Last year, 1.7 million students went to high schools in states with a dedicated one-semester personal-finance course. That number is expected to climb to 6.4 million by 2028, according to projections in a December report authored by Pelletier.

It's no coincidence that the financial-literacy push intensified in the pandemic's wake, the report noted.

The good news is that teachers increasingly want to learn about financial literacy for their students and themselves, said Tim Ranzetta, a co-founder of Next Gen Personal Finance. The nonprofit's services include teacher workshops and curricula at no cost to schools.

In the last four years, more than 17,000 teachers have amassed over 430,000 hours of training and instruction through Next Gen's certification courses, online modules and in-person workshops, he said. Teachers and students are a key part of the push for more financial literacy, he said.

"Once you've learned this yourself, you become a believer," he said.

-Andrew Keshner

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03-09-24 0810ET

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