More states are beefing up their requirements for teaching financial literacy to high school students, recognizing that many of those students are ill-prepared to manage their money effectively once they head off to college or the "real world."
One of those states is Kentucky, which beginning with ninth-graders in 2020 will require a financial literacy course before high school graduation. That move was a long time coming. Policymakers in Kentucky tried and failed for at least six years before enacting the financial literacy measure into law, according to a report by Stateline, a news service established by the Pew Charitable Trusts.
The need became clear to Kentucky Treasurer Allison Ball when she and a colleague talked with high school seniors in 2017 about credit cards and other aspects of personal finance. "We kept using the word 'interest' and we kept getting blank stares," Ball told Stateline. When she asked the students if they know what "interest" is, none did.
In Kentucky, the need for more personal finance education was clear. Stateline reported how Kentucky is the 44th most financially literate state, according to a WalletHub analysis based on 15 metrics, including the availability of high school financial literacy classes and the share of adults with rainy day funds. And the state has the eighth-highest personal bankruptcy rate, with 345 bankruptcy filings per 100,000 residents, Stateline reported.
Many other states, including West Virginia, also have challenges. WalletHub's analysis found that the Mountain State ranks 38th in financial literacy, its citizens' average credit score ranks 39th, and its share of adults with rainy-day funds places dead last among all states.
While emphasizing financial literacy education for students won't address all of those problems, it certainly could help at a time when U.S. household debt reached $13.2 trillion in the first quarter of 2018, the 15th consecutive quarterly increase. Standard & Poor's 2014 Global Financial Literacy Survey showed the U.S. ranked 14th, with only 57 percent of American adults found to be financially literate.
West Virginia already has taken some steps in recent years toward improving personal finance education, and the effort has been recognized by some groups. In a 2017 report card prepared by Champlain College's Center for Financial Literacy, high schools in West Virginia earned a B+ for teaching personal finance.
But in the 2018 Survey of the States by the Council for Economic Education, the state didn't fare so well. It noted that the state required a high school economics course to be offered but did not require that it be taken. The report also noted that there was no standardized testing of the students required to determine how effective the instruction was. The Champlain report also noted that it is not clear how West Virginia measures student achievement in financial literacy.
That's a problem present in many states, according to the Survey of States report. Only about a third of states require testing to gauge what students have learned about managing personal finances. Without such a measure, it's difficult to gauge how well the classes are doing at preparing the students for their futures as adults.
We applaud the actions that Kentucky, West Virginia and other states have taken to improve their students' financial literacy, but taking it a step further - gathering data to know what students have learned - is important. The financial world is becoming increasingly complex for individuals, and more should be done to help young people sort it all out.