The Wisconsin Assembly recently passed a bill that would require public schools to incorporate financial literacy into their kindergarten-through-12th grade curriculum. If this bill becomes law, it would be the first time teachers are required to include financial literacy among subjects such as math, science, reading, writing, geography and history.
Whether or not this bill becomes law, the subject of financial literacy is an important one for people of all ages—from high-schoolers to retirees. Here’s a brief overview of what financial literacy means and why it’s important.
As defined by the National Financial Educators Council, financial literacy means “possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”
What is making financial literacy more important?
The financial world is significantly different for students today compared to previous generations. The Department of Education estimates that 80 percent of Wisconsin students have a job while they’re in high school, and almost one-third have personal checking accounts and credit cards in their own names.
Economic stability within our communities, as well as a continual rise of our state’s economy, will ultimately depend on the financial literacy skills that students gain while in school. With financial trends constantly evolving, the importance of financial literacy is becoming clearer.
Changes in the Financial World:
1. Retirement Planning: There’s been a major shift in retirement plans over the past generation as employers discontinue defined benefit (DB) plans, or pensions, and instead offer defined contribution plans such as 401(k) plans. This shift places investment responsibility on employees. Financial literacy is necessary to manage retirement assets through the accumulation phase and after retirement. Young people need to understand the importance of starting their retirement savings as soon as possible as they begin their careers.
2. Technology: Technology is changing how we bank, pay for products and services, and manage investments. Financial literacy includes understanding both how to use these tools and the purposes they serve.
3. Student Loan Debt: According to an article on credit.com, 70 percent of graduates in Wisconsin in 2015 had student loan debt, with an average amount owed of $29,460. Student loan debt repayment is a significant aspect of many graduates’ financial situation—and can sometimes get in the way of other goals such as saving for a down payment on a house.
4. Credit Card Debt: According to a study by Bankrate.com, about one in four Americans have more credit card debt than emergency savings. It can take years to build up an emergency fund, but a credit card bill can be racked up in a matter of minutes. Financial literacy includes understanding the importance of saving from a young age, as well as the repercussions of accumulating massive amounts of credit card debt.
5. Buying a House: It’s hard to imagine at a young age the challenge of accumulating enough savings to serve as a down payment on a house. Although credit scores are important to get approved for a loan, it’s the down payment that often delays first-time buyers from purchasing a home. Financial literacy means understanding the importance of a savings plan to help meet big goals such as home ownership.
The bill that would require financial literacy courses for kindergarten through 12th grade students has since been referred to the 2017 Senate Committee on Education. There was a public hearing held on August 17, 2017. If it’s passed, students will have coursework integrated into their curriculum aimed at addressing important financial concepts as well as keeping up with new trends.
By Rebecah Wickert-Carini
Why Financial Literacy is Important for All Ages