Is it time to start teaching students personal finance?

“You don’t blame the victims for what happened, but you also recognize that fewer people would have been hurt if they had known a little bit more.”

Laura Levine

Executive director of the JumpStart Coalition for Personal Financial Literacy

MarketWatch

SAN FRANCISCO — If personal finance were a high school graduation requirement, would we have avoided the current financial crisis? Probably not. But a higher level of money smarts among American consumers might have ameliorated some of the problems we’re seeing today.

“You don’t blame the victims for what happened, but you also recognize that fewer people would have been hurt if they had known a little bit more,” said Laura Levine, executive director of the JumpStart Coalition for Personal Financial Literacy, a Washington-based financial-education advocacy group.

Personal finance isn’t something most people learn in school.

Only three states — Utah, Missouri and Tennessee — require K-12 schools to teach a one-semester personal finance course, according to the JumpStart Coalition. An additional 17 states require personal finance as part of another class and 30 states have no requirement.

But ranking state requirements isn’t easy. Some states require schools to offer financial education, but students don’t have to take the class. Others require personal finance as part of other subject matter, but there’s wide variation in what is taught.

JumpStart uses a fairly strict measure: Those three “gold standard” states require a stand-alone course on personal finance. A separate survey by the Council on Economic Education in 2007 finds that seven states require personal finance in high school, but in some cases it’s embedded in another course, such as economics.

One thing is clear: Students in many states don’t get financial education. High school seniors answered just 48 percent of questions correctly, on average, on a 31-question personal finance survey by JumpStart in 2008. And that’s down from an average of 52 percent correct in 2006.

“The critical piece of any kind of financial education is truly your approach to spending, borrowing and saving. Once you have those pieces, then you can build the rest of it,” said Tahira K. Hira, a personal finance professor at Iowa State University and a member of the President’s Advisory Council on Financial Literacy, created by President Bush in January 2008.

“If you think of financial education only in the area of retirement planning, investment planning, portfolio construction — people will never get to do that unless you have the basics down, and the basics are built at a very early age,” Hira said.

Schools may choose to teach the topic, even in states where it’s not required. Take Castilleja School, a private, all-girls school in Palo Alto, Calif. Recently, Christy Story, a history teacher, tapped an outside consultant to teach a one-hour personal finance seminar to the school’s senior class.

Before the seminar, Story asked her students to circle their values on a piece of paper — love, friendship, success, environment. Then she asked them to write down the last five things they spent money on. This elicited a chorus of complaints. “I don’t remember.” “Does a latte count?” Then, she asked if their purchases matched their values.

The exercise “drives home that the simplest and yet most overlooked budgeting tool is just to start to track your money,” Story said, in an e-mail interview. “The key to financial health and also a fair amount of personal satisfaction comes through living one’s values and to do so you have to make smart choices with your money.”