Financial Education: Creeping Toward Success

By: Dan Kadlec

The financial education movement has a lot of momentum, and perhaps because of that it's been generating a lot of criticism as well. Dissenters like Lauren Willis at Loyola Law School in Los Angeles say the whole effort is so futile as to be, to borrow her word, "humorous."

She and others make some fair points. Meanwhile, even those who advocate teaching money to kids -- despite some 1,400 studies in hand -- are hard pressed to show conclusive positive results. How can that be?

Well, it's not enough to prove that kids can and want to learn about budgeting and borrowing. Done. The question now: does this kind of knowledge trump basic destructive impulses like the desire for instant gratification and peer acceptance? In other words, will learning about money in school lead to behavior change?

What intuitively seems obvious has been difficult to document. A lot more work is needed to directly link financial education in the classroom to better money management practices among adults. Without such proof the critics will continue to bay, school programs will run out of steam and the financial literacy movement will have little impact.

So it is heartening to find that the President's Advisory Council on Financial Capability recently endorsed U.S. enrollment in the 2012 PISA (Program for International Student Assessment). When the council was reconstituted under President Obama my fear was that it would shift focus and resources to programs for adults and the underprivileged rather than seek to teach all kids good money practices before they have a chance to develop bad money habits.

But that has not been the case. Educating youth about money is a clear priority. Addressing the council recently, Michael Staten, director of the Take Charge America Institute at the University of Arizona, made the case why. Children in school, he said:

Benefit from repetition If we start early enough kids will benefit from years of money lessons. Repetition is a great learning tool.
Represent a captive audience Kids have no say in the matter. They go to class and study what educators deem best for them. So why not insist on a dose of money instruction?
Can cross learn Money lessons don't have to be in a stand-alone course. They can be integrated into math, science and english classes.

How might PISA help? PISA is an OECD-led standardized scholastic assessment of 15-year-olds that takes place every three years. In 2009, 65 countries and up to 10,000 students per nation took part, providing a foundation for statistically valid comparisons of students' capabilities in mathematics, reading, and science. In the 2012 PISA there will be a financial literacy add-on, which will be the first large-scale international study to assess the comparative financial skills of teens in different countries.

This assessment will help us learn where we stand as a nation in what has become a global quest for greater financial literacy. If the U.S. compares as unfavorably on this assessment as it does in math and science it should convince us that we have a lot to learn and, more importantly, show us who we might learn from. Hopefully, the exercise will help us prove what works best a little faster.

Photo courtesy Flickr user pinksherbet
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