Why It's Important to Teach Your Students Financial Literacy—and Three Ways to Do It

In Oakland, CA, more than 60 students at James Madison Middle School gather to talk about money. The conversation is robust. One student shares his family’s experience saving for emergencies. Another group debates whether a new bike is a “want” or a “need.” Across the room, two young women are deep in conversation about college majors and future income.

Today’s young people face an overwhelming number of complex financial decisions. However, many are unprepared to make informed financial choices as they move into adulthood. In fact, three out of four young adults cannot answer basic financial questions.

Teaching financial literacy in the classroom is one promising way to improve financial capacity for today’s young people. Research shows that by the age of 12, students will develop an economic understanding that researchers describe as “essentially adult”. By including lessons on smart money habits early in their cognitive development, we can encourage young people to save money, foster family conversations, and empower students to be stewards of their own financial futures.

Reaching Students Digitally

The need to improve financial skills and capacities is not unique to any one state or school district. It is a challenge that impacts every corner of America and must be tackled at scale. Luckily, there are early signs that Gen Z—youth born after 1996—is shaping up to be a generation that strives to be financially savvy. These students have seen their parents and family members grapple with the defining financial challenges of the last decade: student loans, debt and financial illiteracy. They are looking for better outcomes.

My organization, The MassMutual Foundation, is committed to equipping young people with the financial skills and capacities they need to achieve those outcomes. When we looked at the research on Gen Z and compared it against the state of financial capability in the U.S., we saw an opportunity to use video, animation, 3D gaming and avatars to bring financial concepts to life for the next generation. In 2015, we launched the FutureSmart Digital program—a gamified, web-based financial education course, in partnership with education technology company EVERFI.

Lessons on The State of Financial Capability

The FutureSmart Digital program has an ambitious goal of reaching 2 million students by 2020. We recently released an interactive report that examined financial literacy data across the country, on a state by state basis. This report led us to three conclusions that we hope will inspire parents, educators, and community leaders across the country to take the steps needed the improve the financial capacity of young people in their communities—especially to have conversations about money back home.

1. Make the Most of All Financial Education Opportunities
Parents are the primary influence on their children's financial attitudes and behaviors. But there is room for additional education; the majority of American adults—60%—have not been offered financial education by a school or employer, and even fewer have taken advantage of the education offered.

It’s important to expose children to money and smart financial decision-making from a young age. Finding time for financial lessons in everyday life can be as simple as suggesting kids accompany their parents on a trip to the grocery store, involving them in basic transactions and purchasing decisions. One FutureSmart teacher reported that students have asked their parents if they could have pre-paid debit cards for their allowance.

Parents and educators should also proactively ask their legislators and administrators to ensure that financial education is supported in their states’ curriculum. According to the 2017 Financial Report Card from Champlain College’s Center for Financial Literacy, only five states—Alabama, Missouri, Tennessee, Utah and Virginia—received an A grade from Champlain College for their efforts.

2. Supplement At-Home Education with Digital Learning
Digital financial education can—and does—play a role in providing students with the financial knowledge they may not receive at home. For example, the more than 500,000 students who completed the FutureSmart course by the 2016-17 school year nearly doubled their scores on financial assessment tests.

There are many ways that educators can embed digital financial education into the classroom. We’ve seen social studies teachers include personal finance in their civics curriculum and math teachers use digital courses to teach topics like unit cost. In other schools, digital financial education lessons are built into computer skills and business electives. For low-hanging fruit, digital lessons can be assigned as homework supplements to in-class discussions, with individual modules on budgeting or wants vs. needs.

3. Find Applications that Resonate with Young People
We’ve also found that students are taking what they've learned through digital courses and having financial conversations at home. For our FutureSmart student population, a quarter of students who hadn't been talking to their parents now report that they've had conversations about topics like how to spend or save money and how they will pay for college.

When teaching financial skills, it’s important to hone in on applications that resonate with students’ everyday lives. Understanding wants vs. needs is a popular lesson among middle-school students and can be a low-barrier entry point to starting conversations at home. Budgeting and costs are also a popular topic of discussion between students and their parents. For example, students can talk to their parents about creating a budget, the cost of their family’s electricity bill, and the differences between organic and conventional produce. Finding these opportunities can help students bridge the gap from learning to application.

Beginning important financial skills conversations with students early on can help them learn the importance of savings, staying in school, going to college, career planning, and how each has a profound impact on their future financial success. To reach today’s youth—a generation of digital natives—it’s crucial to provide an interactive and fun experience that gives students the basic building blocks of financial literacy. Parents, educators and community leaders can help address the problem of financial capability by taking advantage of the technology available at their fingertips. Financial education is key to economic opportunity; it will ensure that the next generation of future leaders follow the best financial path at every age.