Buying It

Why financial literacy should be a graduation requirement—and how we can start earlier

If the goal of K-12 education is to prepare children to be successful members of society, the basic subjects are no longer sufficient. High school graduates need financial literacy skills to productively manage their lives whether they go to college, trade school or directly into the workforce. Our teenagers already participate in the economy. In New Mexico, many contribute to household incomes and expenses.

House Bill 171—one of the first measures signed into law by Gov. Michelle Lujan Grisham from this legislative session—requires high school economics to include some financial education, but it doesn’t make a stand-alone financial literacy class a graduation requirement. This means it doesn’t go far enough in educating our kids.

New Mexico students face opportunity gaps—including lack of quality health care, food scarcity, inadequate housing and low educational attainment among parents—that result in poor outcomes. We’ve placed at or near the bottom of national child well-being ratings for years, according to the Annie E Casey Foundation’s annual Kids Count Data Book. This isn’t a one-solution problem. However, high school graduates who know how to budget, manage money, plan for long-term goals and invest stand a better chance of supporting their families’ well-being.

Establishing financial literacy as a high-school graduation requirement could both close some opportunity gaps and improve math, reading and social studies proficiencies, which, in New Mexico, are among the country’s lowest. Financial education’s relevant, real-life scenarios require critical thinking and complement economics and practical mathematics, such as algebra and statistics.

Employers think a financial literacy requirement is a good idea. Last year, Dion’s Pizza CEO Mark Hermann advocated for it in the Albuquerque Journal: “Some of our younger employees don’t have bank accounts in which to deposit their hard-earned money; others do not know that they need to file federal and state taxes,” he wrote. “Without basic personal finance education, far too many employees turn to check-cashing outlets and get charged unnecessary fees, take out high-interest loans, or accumulate credit card debt.”

Hermann identifies issues that set up young adults for years of struggle. He stresses that they’re avoidable with education.

New Mexico schools must offer a financial literacy elective, but that’s not the best standard. A stand-alone financial literacy graduation requirement is. In 2008, Utah became the first state to enact this with its General Financial Literacy standard. The class covers financial planning, income and career preparation, money management, savings, investing and retirement accounts. It’s been successful. In fact, Utah’s 2018 GFL analysis concluded that students completing the requirement “appear to have better personal financial knowledge and make better behavioral choices than those who have not.”

This is worth paying attention to, especially given our state’s low child-well-being ratings. Knowing how to account for opportunities and costs goes beyond money sense: Because financial literacy involves thinking about money over time, it could help students make better life decisions. New Mexico needs to join the 25 states following Utah in recognizing the multiple, long-term benefits of financial literacy education.

The Legislature has tried over recent years, and HB171 is a step in this direction, but the Senate didn’t adopt an amendment to make a financial literacy course a graduation requirement.

New Mexico’s Public Education Department also made progress with its 2021 updated social studies standards. They didn’t address financial literacy, though, until enough New Mexicans pushed back against PED’s first draft. Think New Mexico, a Santa Fe-based think tank that’s contributed to proposed financial literacy legislation, led a public support effort to include personal finance in PED social studies standards. PED responded by amending its draft. Abenicio Baldonado, then Think New Mexico’s education reform director, called this success “an important first step to tackling intergenerational poverty.”

I also believe financial education benefits go beyond the classroom and may help students better handle rough circumstances.

Some people argue that teaching money management doesn’t deter poor financial behaviors. A 2014 study published in Management Sciences found “that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples.” High school financial literacy requirements may not be as effective as we might hope: The authors note that, “like other education, financial education decays over time.”

I don’t think this is reason not to teach key life concepts, however. Continuing education could reinforce financial literacy and introduce updated concepts. Maybe more importantly, students can start learning about finances long before high school. Early, hands-on education sticks and responds to children’s interests.

The Girl Scout Cookie Program, introduced in 1917, is an example of successful youth financial education. It’s the nation’s largest financial literacy program and develops five financial-planning skills—goal setting, money management, people skills, decision making and business ethics—years before adulthood. As a Santa Fe Girl Scout troop leader for 15 years, I taught my scouts to manage the troop checkbook and give monthly treasurer reports. They began informed participation in our economy early, provided with real-world opportunities to manage money, become ethical and reliable entrepreneurs, set goals, meet deadlines, work with others and understand customers. These skills aren’t taught in schools, and Scout leaders have filled the gap for decades.

Sadly, Girl Scouts is declining in membership: Overworked, over-scheduled parents have little time to oversee extracurricular activities. Students still need to learn this information, however; and skills-based, real-world education isn’t gender specific. This is another reason why public schools should assume responsibility for teaching financial literacy. It is also why I believe New Mexico should offer financial literacy classes for all middle schoolers. Compelling programs exist, and many of our students enter the workforce in their early-mid-teens.

The new law does, however, allow school districts to impose two units of their own requirements. Here’s where we must focus on adding a financial literacy course to Santa Fe Public Schools’ high-school graduation requirements. We need to meet our state’s low academic and high poverty ratings with practical, relevant, hands-on education. Financial literacy education can directly, immediately benefit students in our public schools and also ensure that they have knowledge to support stable adult lives, and family well-being, after graduation.

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