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The Simple Dollar

Can financial education prevent blunders?

Consumer education and personal finance classes may do little to improve financial behavior

By Guest blogger / April 5, 2011

Laura Kuleszka helps a GED prep class through math exercises Middlesex Community College in Lowell, Mass., on May 13, 2009. Do courses on personal finance actually impact behavior?

Anne Hermes / Staff / File

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When I was in high school, I took a consumer education proficiency test and passed it with flying colors, demonstrating that I had the knowledge needed to manage my own money and be a savvy shopper. Within ten years, I was buried in debt.

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This isn’t an experience that’s unique to me. On The Simple Dollar’s Facebook page (feel free to become a fan), I recently asked “Did you take a personal finance or consumer ed class in school? Was it useful to you? Did it keep you from making financial mistakes later on?”

Quite a few people publicly stated the uselessness of their personal finance education, while still others emailed me or sent me direct messages about it. A sampling of the comments:

Ryan B.: “i had to take consumers ed with drivers ed and [...] no….i had to learn from mistakes…”
Kelly K.: “My consumer ed class in high school was a waste of time.”
Charlie R.: “Yes, I did, and no, it didn’t.”
Baley W.: “Senior year in high school we took FPU. I remembered the principles, but I still got into debt. I don’t think it helped one bit, even though I’d like to think so.”
Shiela F.: “In high school & college along with accounting classes and no, it did not help. ”
Annie J.: “We had a small personal finance chapter in Home Ec./Family Relations class and no, it wasn’t helpful.”

Even some who got value from their classes saw that it didn’t impact their peers. Amanda H. stated: “I took a college personal finance course at the behest of my father. It wasn’t perfect, but it gave me a whole new awareness on things like investing and how interest works. And how important it is to get started young. Which I think was rare and put me miles ahead of my college-age peers.”

Many others didn’t recall any sort of education, which either means there literally wasn’t a class or the class had so little impact on them that they did not recall it at a later date.

Simply put, personal finance education as it currently exists is not reaching people when they need it. Quite often, they learn about it later on through their own difficult experiences.

In fact, I think “experience” is the key word here.

Consumer education and personal finance education is often lumped in with many other classes at the high school level. They’re taught in a classroom environment with minimal examples that actually impact the lives of students in any way. Sometimes it’s a class all its own, but other times it’s just a small piece of another class and at yet other times it’s not dealt with at all.

Just like any other ordinary class, one or two will “click,” a handful of others will approach it like any other academic subject and succeed on the surface without deeply understanding it, and many others will let the info go in one ear and out the other, retaining as little as possible.

Simply put, treating personal finance as just another thing that students need to be “educated” in doesn’t really work.

How can we possibly make personal finance education relevant (beyond the simple step of making sure that it’s at least presented)? Over the past few years, I’ve been collecting ideas from the mountains of personal finance books I’ve read, and I’ve got some suggestions for how to turn personal finance education into something much more valuable than the experiences described above.

First, homework (and classwork) should focus on discussion and actually doing things. Make homework (most of the time) very simple for this class. Go home and ask your parents a basic question about their finances and report on what you learned. Why do they buy a certain product type? What was their best experience at work? How do they do their taxes? The goal isn’t to get students to tell about their families, but to get them talking at home about personal finances.

At other times, focus on actually doing things. Make everyone in the class get a savings account or a checking account in their name. Have them go to the store and find the best bargains they can on enough laundry detergent and dryer sheets to do 100 loads of clothes. Hand out copies of credit card offers and have them figure out what happens if they charge $500 on the card and don’t pay it.