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An excellent way to avoid financial regret as an adult is to have received more financial education as a teenager, but until recently, the primary sources of that edification was from parents or a kid’s own inquisitiveness – not from schools.
Fortunately, that scenario is improving. Quiet as it was kept, Kentucky Gov. Andy Beshear (D) last month signed into law HB 342, which ensures that starting with the class of 2029, all high schoolers in that state will be required to take at least one personal finance class. It was an act of bipartisanship as the bill was introduced by Republican Rep. Michael Meredith. With that bill becoming law, 27 states –10 fully implemented, 17 waiting to implement – are now “guarantee states” meaning high school kids in those jurisdictions are guaranteed to be exposed to at least one personal finance course prior to graduation.
Speaking of bipartisanship, improved financial education for kids indeed transcends party lines. California and Oregon, which are two of the bluest states in the country, are among the 17 states that will be implementing personal finance course requirements. So is red Florida. Reliability red Alabama, Mississippi and Tennessee have already deployed personal finance class, according to Next Gen Personal Finance (NGPF). Several purple states are on the list, too.
Financial Education Pays Dividends
Twenty-seven states having some form of financial education for teens represents progress. It’s more than double the 11 states that had such courses in 2021, but that also means nearly half the country still needs to get on board. Those other 23 states have compelling reasons to do so.
“A report conducted by Tyton Partners, Investing in Tomorrow: Lifetime Value of Financial Education in High School, estimated that the lifetime value of a one semester personal finance course for a Kentucky student is $102,000,” notes NGPF.
That jibes with other studies indicating that the value of a personal finance taken as a junior or senior in high school can be as much as $100,000 over the life of that student. A sensible conclusion to be sure because as noted by the National Financial Educators Council’s (NFEC) Cost of Financial Illiteracy Survey, the cost of poor financial literacy is high.
Said another way, teaching a 16-18-year-old-today about the importance of avoiding bank overdraft fees, maintaining good credit scores and the like can have profound, positive impacts over the course of those teen’s lives.
“Research has clearly demonstrated that a personal finance course improves long-term financial decision-making and positively impacts student debt decisions and credit scores, helps graduates avoid predatory lenders, helps increase savings rates among teachers, and even generates positive spillover effects on parents,” observes NGPF.
Good News for Advisors, Too
The extent to which personal finance classes geared toward teenagers touch on investing varies based on each school district’s curriculum, implying that some schools may be offering students more investing-related content than others.
Still, “some” is a good starting point because it gets kids interested in investing early and the earlier they start, the larger their investment accounts will be in the future.
More financial education is also good news for advisors. On the surface, the opposite may be appear to be true, but the reality is different. Some kids that learn about investing today may emerge with the takeaway that investing is critical to long-term wealth-building, but they might find the subject matter daunting. That crowd becomes prime candidates to work with advisors later in life. Likewise, more educated clients are typically more engaged clients and the less time an advisor has to spend with client on basic financial concepts, the more time can be allocated to sophisticated issues such as estate planning, retirement savings and tax mitigation strategies.
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