The Importance of Financial Literacy and Its Impact on Students

Spring is a time for graduating students and their families to start planning how they will pay for higher education in the coming fall. This is incredibly important, as being educated on these types of finances can be crucial in reducing poor financial outcomes. As the end of the school year nears, we here at FACTS thought this would be an excellent time to shed a light on the importance of financial literacy – and why the sooner students start learning about it, the better.

The Importance of Understanding Finances

Today’s high school students feel unprepared about managing their finances according to a recent survey by EVERFI. The US Department of Education (ED) shares that students who receive personal finance education in line with their goals may be more likely to retain the information and use it to make informed financial decisions. Introducing the concepts of financial literacy may need to begin before students are admitted or preparing to obtain their higher education. Research from FutureSmart, a program by the MassMutual Foundation, shows strong evidence that financial education is effective – and necessary – for students as young as middle schoolers. Additionally, Champlain College suggests personal finance education should be a cumulative process, with age-appropriate topics taught each school year. Even if it seems early to start teaching these concepts, it’s important to provide substantive personal finance education throughout elementary school and into high school.

The Case for Financial Literacy in Schools

It goes without saying that learning about financial literacy is important, as personal finance education provides students with the knowledge and skills to manage financial resources effectively for a lifetime of financial well-being. It’s equally important, however, that this education be offered at school. A 2017 T. Rowe Price Survey noted that 69 percent of parents have some reluctance about discussing financial matters with their kids, so offering students financial literacy education at school is an ideal solution.

Additionally, research has shown that far too few students — especially those from low-income backgrounds — receive any personal finance education during high school, yet are expected to make financial decisions with long-lasting impacts about student loans and budgeting immediately after graduation. Even though today’s students have the benefits of technology and instant access to information, that doesn’t necessarily translate to financial literacy skills. Having access to that information during their formative years, especially in the form of resources like classes and learning materials, can set a firm foundation for their future financial stability.