Teaching Kids to Manage Money Yields Big Returns, Research Says
A 2023 study shows that when teens receive financial literacy lessons in school, they manage their money more effectively well into adulthood.
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Go to My Saved Content.Walk into Tamekia Davis鈥檚 11th-grade classroom and you may see students鈥� desks covered in beans鈥攂ut it鈥檚 not a cooking class. 鈥淭he beans will represent your salary,鈥� announces Davis, a teacher at Parkdale High School in Maryland, causing a few heads to turn. 鈥淎nd you鈥檙e going to have to decide where you are going to spend this money.鈥�
With this unusual task in hand, students huddle together in pairs to make difficult decisions. Should they spend one bean to ride the bus or three beans to buy a used car? And what about food鈥攃ook at home for two beans or eat out for four? This bean-based crash course in budgeting not only is fun; it鈥檚 also an example of a relatively simple lesson that introduces students to key concepts in personal finance.
But how effective are finance lessons, really? When kids are introduced to complicated financial topics like compounding interest rates, savings accounts, or personal and business taxes, does the information just go in one ear and out the other?
New is unequivocal: Financial literacy lessons have an 鈥渙verwhelmingly鈥� positive impact on students鈥� future financial habits, from budgeting and saving to avoiding predatory loans, according to their 2023 report on nationwide high school financial literacy. In fact, the effects on students鈥� financial well-being are detectable over a decade after graduation.
Research Points to Robust Benefits
In their report, Champlain College鈥檚 researchers assigned U.S. states letter grades based on their commitment to high school financial literacy. An A meant that the state required 鈥減ersonal finance instruction as a graduation requirement that is equal to a one-semester, half-year course鈥� at the high school level. An F, meanwhile, indicated that the state had 鈥渧irtually no requirements for personal finance education in high school.鈥�
Only seven states received an A. A plurality received Bs, while five states鈥攊ncluding California, home to one of every eight high school students in America鈥攇ot an F.
Many states are in the process of implementing new personal finance laws, though, so the researchers project that 23 states will reach an A grade by 2028. That鈥檚 a welcome trend, the authors write鈥攏ot simply because the Covid-19 pandemic has highlighted the financially precarious situations of many American families, but also because high school personal finance courses have a robust impact on students鈥� future financial habits.
鈥淥verwhelmingly, high school financial education improves credit and debt behaviors,鈥� the report says. 鈥淩equiring financial education improves credit scores, reduces delinquency rates, reduces the use of alternative financial services (e.g., payday lending), and shifts students from high-interest to low-interest methods of financing a college education.鈥�
A they cite, for example, found that 18-to-21-year-olds were at least 40 percent less likely to fall a month behind on payments to credit accounts if they had three years of financial literacy education in high school; these recent high school graduates also had credit scores roughly 25 points higher than those of their peers.
These advantages last, too: that the benefits of high school finance lessons鈥攆rom increased savings to speedier loan repayments鈥攚ere still detectable 12 years after graduation.
Surprisingly, the benefits can also be spread among generations. Parents of the students receiving financial instruction tend to end up with and a lower chance of defaulting on loans, and educators who teach financial literacy often see an increase in their own .
FINANCIAL LITERACY ACTIVITIES TO TRY
Given the widespread benefits of financial literacy, it seems worthwhile to integrate more finance-related lessons into class鈥攅ven if your state doesn鈥檛 mandate it, and even if it isn鈥檛 a subject you鈥檙e responsible for.
There are a variety of simple personal finance lessons that can slot into subject-area classes like math and English language arts. Here are a few to consider trying:
Play the bean game: To try the bean game from Davis鈥檚 class, check out this embedded worksheet鈥攁s well as the from Next Gen Personal Finance. The worksheet lists various housing, food, insurance, clothing, and transportation options, ranging from 0 to 4 beans in price. (You can use any small object for the currency.) In her classes, Davis includes an optional element of chance: A digital wheel determines whether a random financial event will affect the whole class. If the wheel lands on 鈥渂roken leg,鈥� for instance, groups must remove three beans from their paper if they didn鈥檛 include health insurance in their original budget.
Evaluate credit cards and tax forms: At San Marcos High School in California, personal finance teacher Tara Razi 鈥渓iterally brought her wallet into class and showed us her different credit cards,鈥� one of her students . Having kids compare different credit cards鈥攖heir interest rates, late fees, cash-back policies, and benefits鈥攊s a fun and informative activity that could be integrated into a math lesson. For another math-related finance activity, Mission Hills High School鈥檚 Jeff Montooth has his students fill out tax forms using either fake pay stubs or real ones from their part-time jobs; kids are surprisingly engaged by filing mock taxes, often competing to get the biggest tax refund, Montooth told KQED.
Budget-based PBL: Middle school teacher Pamela Kranz designed a monthlong project-based learning (PBL) unit that she integrated into her math classes. Students choose a career from a list of options, then receive a 鈥渟alary鈥� for the month based on the actual median salary for that career, as reported by the . Over the course of the month, students must choose between apartments (from actual online listings), transportation options, groceries, and more. During , they calculate their expenditures to make sure they鈥檙e staying within budget.
Play financial Jenga: Family and consumer sciences teacher Kailen Stover has students play a game of Credit Score Jenga, where each Jenga block that a student pulls out has a number corresponding to one of 50 different credit-related events. If a student pulls a seven, for example, it means they 鈥減aid [their] $350 car loan payment on time鈥� and should add 10 points to their credit score; pulling a 33 means they were a victim of identity theft, and they must subtract 70 points.
If you鈥檙e looking for more specific finance-related curricular resources, check out free online lesson plans offered by or class activities from the .