Who is Responsible for Teaching Financial Literacy?

It has become increasingly evident that nations around the globe are still in the grip of the worst economic freefall since the Great Depression. Crisis. As the European Union faces both short and long term unrest and the opposing forces within our nation battle over entitlement reductions vs. tax increases the vast majority of our citizens are clueless about the fundamental issues that are the root causes for our global financial crisis. Today, this epic financial crisis provides educators with an opportunity to turn our attention to how, when and what we teach our children and through them, our community, about sound financial practices.

For decades, our education system has failed to systemically equip Americans with basic financial knowledge and thinking strategies needed to insure that we have educated consumers of financial products. Symptoms of this national dearth of financial literacy are all around us and are reflected in current low savings rates, the ongoing mortgage crisis, the debt burden carried by so many Americans, and their increasing sense of fiscal and personal despair. A comprehensive, cogent policy for the promotion of financial literacy instruction is lacking which underscores the immediate need to implement sweeping policy and programmatic changes in financial literacy education. Our nation cannot afford to let another generation slip through the cracks, fall into continued debt and remain uninformed about how money works for the duration of their adult lives!

This lack of a formalized approach to the teaching of financial literacy indicates that far too little has been done to help students systemically learn about the principles of financial literacy, leaving them ill equipped to make financially relevant decisions. In recent years, several states have only scratched the surface of content standards as they move towards implementing financial literacy programs. Currently, a plethora of worthwhile financial literacy materials already exists. Individual state efforts to revise financial literacy curriculum content represent another cycle of reinventing the wheel without focus on classroom learning strategies which are designed to help integrate financial literacy concepts into mandated curriculum.

A Google search will generate pages of citations regarding this topic. The Department of the Treasury’s Office of Financial Education website states it will be working “to promote access to the financial education tools that can help all Americans make wiser choices in all areas of personal financial management, with a special emphasis on saving, credit management, home ownership and retirement planning. The Office also coordinates the efforts of the Financial Literacy and Education Commission, a group chaired by the Secretary of Treasury and composed of representatives from 20 federal departments, agencies and commissions, which works to improve financial literacy and education for people throughout the United States.”  What are these financial education “tools”?  In a traditional fashion, what has been brought to teachers and students are content materials laden with high quality information, but not the decision-making, problem solving and thinking tools for dealing with day-to-day financial decisions.

When it comes to learning the basic principles of financial literacy most of America’s children have been left behind. They are left behind not because there is a shortage of information but because little attention has been paid to teachers who need help to incorporate financial literacy concepts and problem solving tools into a day that is already full of mandated course content. Officials from the SEC, FINRA and the Jump$tart Coalition for Personal Financial Literacy visited eighteen elementary schools throughout the country to teach a lesson on financial literacy. “Teaching children about money is an investment in the future, because an investment in financial literacy can pay a lifetime of dividends,” SEC Chairman Mary Schapiro said. 

Unfortunately, this may just be wishful thinking. Lisa Fairfax at the Conglomerate blog found a 2008 study showing that our efforts to invest in financial literacy have a grim rate of return. Eleven years ago, the Jump$tart program began measuring financial literacy and discovered the average financial literacy score for high school students was 57.3%, which is frighteningly low. After a decade to improve financial literacy, including hundreds of attempts at the state and federal level, the average score declined to 48.3%.

Matt Yale, Deputy Chief of Staff, US Department of Education believes that “we need to start taking financial education seriously in this country. Our economy is increasingly complex, small mistakes can have major consequences - especially for the poorest Americans, and study after study shows that people don't have the skills they need to make wise financial decisions for themselves and their families. Schools have a major role to play here. Stand-alone high school courses seem to be valuable, and we probably need more of those, but the experts tell us that personal finance concepts should also be woven into existing curricula much earlier. We can look to other academic subjects to see what has to be in place: shared standards that serve as guideposts for school districts; high-quality teachers who have had appropriate pre-service and in-service training; and rigorous assessment methods that show what's working and what's not, and of course, strong, forward-thinking school leadership. Some states are ahead of the curve on this - Wisconsin, Oklahoma, and Utah, are a few. We're learning a lot from them, and we hope other states will too.

Right now we're partnering with Treasury on the National Financial Capability Challenge, which we hope will serve as a catalyst for getting more teachers involved, and we look forward to being strong partners with schools and states as we all do our best to move the needle forward on this critical component of a 21st century education.”

Tina Lambert stated, in the December 8, 2009 Web CPA, “More than half of teens are eager to learn more about money management, but only 14 percent have taken a class on the topic, according to findings from a Capital One 2007 survey. While 35 percent of those teenagers indicated they’d like to learn from their parents, we might not be the best role models. A mere 5 percent of adults learned money management skills in elementary or high school, a 2007 Visa survey discovered, but 91 percent said they support requiring that financial education be taught in every high school in the country.”

Meaningful and long-lasting learning effectively relies on the use of strategies that recognize the importance of thinking skills; real life problem solving development and brain- based learning approaches such as the use of visual tools. The successful use of these strategies is dependent upon a systemic plan that includes the implementation of focused professional development and sustained school-based support.

In June of last year, I had the privilege of providing testimony regarding the need for teaching financial literacy in our schools.  I stated, “Literacy in schools often refers to reading, writing and arithmetic. However, real life learning, as demonstrated by our current economic crisis, reinforces our belief that the teaching of financial literacy should no longer be an option for the children in our nation’s schools. Our job is to help teachers integrate financial literacy into existing curriculum, develop thinking strategies and to make learning relevant to the needs of today’s students.”

To contend successfully with these challenges is a matter of both professional skill and organizational focus. Without plans for meaningful professional development and content that is integrated into the curriculum through material relevant to students, financial literacy will become another educational catch-phrase, and we will lose this opportunity to educate our citizens about how they may best confront choices in their daily lives to position themselves for long term financial security.

The greater difficulty comes when trying to modify learning strategies to enable students and teachers the ability to distinguish the skill needed to write a check from the skill needed to determine if the check should be written. To be financially literate, a person needs to know how to decide what to do as well as how to do it. The process of transforming bits of information into coherent and useful knowledge – we call this process “thinking” – is the major focus of effective financial literacy education, or at least it should be.

So, just what is “thinking”? Thinking is discerning patterns of information and then making them practical. There are fundamental actions of thinking that we all use every day: describing, comparing, grouping ideas, sequencing, and relating cause and effect. Most often, this is done in our heads; but when learning and working out problems that are difficult for us, we benefit greatly from visual tools to formulate, examine and elaborate ideas. Then, we communicate these ideas, one-to-one with work partners in small groups and in larger working groups.  For example, when any of us makes a financial decision, we should be drawing on basic data and numbers, the context of our present financial picture, and our predictions of our near and far future finances.  We must make comparisons.  We need to be able to categorize different types of income and expenses. We have to use cause and effect reasoning to make high quality decisions.  Visual Tools offer a visual representation of these patterns and processes.  This also enables us to reflect on our thinking and decision-making.   Maybe the most important dimension of financial literacy is how our own financial history and our emotional state when making decision directly influences and frames how we act and react.  Visual Tools explicitly offer financial decision makers, especially young, novice problem solvers, to see how these frames of reference influence what may seem like simple decisions. 

In classrooms across the country, visual tools help teachers and students organize huge amounts of information and manage complex situations while generating exciting and effective solutions to problems. Visual tools should be an important new feature of effective financial literacy education.

Pat Wolfe stated, “One of the most important things we have learned is that the brain is visual...Neuroscientists tell us that the brain organizes information in networks and maps.” David Brooks recently wrote in an op-ed piece in the New York Times (May, 2008) that we are no longer in the information age, or the global communications age, but rather in the cognitive age. According to Brooks, “We’re moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information...information can now travel 15,000 miles in an instant. But the most important part of information’s journey is the last few inches – the space between a person’s eyes or ears and the various regions of the brain.”

We would ask: Does the individual have the capacity to understand the information? Does he or she have the training to apply it? Are there cultural assumptions that distort the way it is perceived? Visual thinking tools are not the flow charts and Venn diagrams of the past. Those visuals represent static graphics and sterile organizational charts and flow charts that have been used to control direct communication, rather than promote dynamic and creative analysis of everyday problems.

How districts react to high stake test scores depends on the leadership demonstrated by board members, school administrators, teachers and community stakeholders. Surveys among district administrators, each with varying years of experience and within geographic boundaries across the country, support conclusions reached by the Council of the Great City Schools and the American Association of School Administrators that the superintendent, supported by an informed board of education are the critical school district leaders responsible for providing the impetus for systemic change that will address the imbalance among races in their schools.

As a retired superintendent of schools and advocate for involving schools and the community in developing plans for the integration of financial literacy concepts into our nation’s classrooms, I support the observations that strong centralized leadership supported by bottom up integration is critical to instructional reform. Yet, leadership and teacher buy in are only two of the contributing factors in implementing the systemic changes impacting learning outcomes for children.

Survey data indicates the problems of systemic dysfunction are massive when it comes to direction and leadership for the inclusion of financial literacy into to a district’s instructional plans. The Teaching Financial Education group and Designs for Thinking are working through national groups like Jump$tart and their network of partners to create a model for teaching financial literacy in our nation’s schools that guides and supports teachers rather than mandating unfunded course content.

Terry Mcsweeney from New York State United Teachers states, “The Teaching Financial Education Project, incorporating Designs for Thinking, sounds like a great tool that will be available to teachers to integrate financial literacy into existing curriculum. We applaud your recognition of the importance of professional development to help teachers increase their knowledge of financial literacy. Your collaborative effort to develop a National Center for Teaching of Financial Literacy as a resource for best practices, tools, and instructional materials on financial literacy and to provide professional development activities is a constructive endeavor.“

Is it possible to fully integrate financial literacy into the school day? Herb R. Brown Ed.D. Superintendent of Schools, Oceanside Public Schools in New York thinks so. Superintendent Brown’s background is in Economics and “I didn't feel the HS Economics class had the time to do justice to Personal Finance.  I convened committees of teachers (three committees - elementary, middle and high) to review the literature and determine appropriate topics and lessons in personal finance.  We settled on 20 lessons in elementary, 40 in middle and 40 in high school.  In elementary, we infused 10 lessons into 5th grade math and 10 into 6th grade social studies (elementary teachers are always complaining they don't have time to add more, so we made it part of lessons they were already teaching.). In middle school, we had a 10-week course in decision-making that we modified to become a 10-week course in personal finance decision-making.  In high school, we added a new 10-week course.  I knew all would not take it unless it was required.  The Board approved this course as a requirement for an Oceanside HS diploma.” 

The significance of financial literacy in public schools has been recognized by the Harborfields Central School District’s Board of Education, whereby the Board of Education adopted the Board Goal for the 2009-10 school year to explore and develop a K-12 financial literacy integrated curriculum.  “In so doing, the Board of Education has recognized the importance of this vital aspect of education for all students.  By implementing it as a Board Goal this year, we intended to stress to our staff, students and community that we believe it is imperative for us to provide financial literacy to all of our kids throughout our schools”, as noted by Harborfields Board of Education President, Donald W. Mastroianni

Jeff M. Lacker, President of the Virginia Federal Reserve Bank, also supports efforts to have financial literacy included in the student’s course of study.  He said, “This is an exciting year for economic and financial education in Virginia, because, starting with the freshman class of 2010, all high school students will be required to complete an economics and personal finance course to graduate. Here is why I think that's so important:

Students make economic and financial decisions everyday. As they mature, these decisions become more complex and more consequential.  Economic and financial education gives students the foundational concepts and principles they need to evaluate important choices effectively. A lot rides on a few key decisions in life, such as whether or not to pursue higher education, whether or not to purchase a house and, if so, on what terms, and how to best save for retirement. These decisions can have huge economic consequences for people, so financial and economic literacy is not just ‘nice to have.’ It is essential in the world we live in today. “

Teaching and learning financial literacy concepts, when isolated from the demands teachers face during their instructional day, seem like achievable goals. However, when there is no plan to help teachers integrate financial literacy concepts into the required subject-centered instruction mandated by state standards, financial literacy becomes a low instructional priority. For financial literacy to become part of the regular instructional program, it must be interwoven with required course content and delivered to students by applying the latest brain research, while at the same time making sure that the teaching strategies are relevant to each child’s learning ability. Most of the existing programs on financial literacy rely on optional and supplemental material, not materials integrated into the core curricula areas. Some of the programs rely on volunteers who visit periodically to provide students with a yearly dose of information. A reliance on “drive-through” professional development or volunteers providing snippets of information that they hope will influence future student actions do not represent what we’ve come to learn about effective teaching and learning strategies.

If we are going to make the effort to develop a pool of informed consumers, then we must apply the same strategic planning models we use for the teaching of math, science, social studies and other core subject areas to the teaching of financial literacy.

The customization of freestanding materials and delivery methods is necessary to integrate content into the existing instructional day. A systemic approach is necessary for students to obtain the sequential and cumulative knowledge of the basic foundations of financial literacy. When students learn to ask questions and think about the reasons why they make money, save money and spend money, they are learning responsible and wise decision-making habits that instill a sense of confidence in their economic futures.

Once the blueprint is developed for the integration of financial literacy into other curriculum areas, we will expand our collaborative efforts to disseminate information through a national distribution network of regional centers. These centers, will provide teacher training of effective financial literacy learning strategies, including the use of appropriate sources of content, culturally based learning and visual tools to teach the basic financial skills needed to create and maintain a budget, to understand credit, loan risk, debt, banking, investments and retirement plans. The centers will focus on helping educators teach the skills and concepts needed for understanding how money works thus aiding students to make the sound financial decisions that are crucial to their economic futures, including decisions about how to finance one of the most important investments they will make in their lives, their advanced education.

We believe the national network of educators will create and conduct teacher training programs that emphasize how to embed financial and economic literacy education into core academic subjects. The cornerstone of the canter will be Innovation, Collaboration and Evaluation. Innovation refers to the integration of financial literacy concepts into mandated curriculum using culturally relevant strategies.  One such strategy is visual tools, tools that embed thinking and decision making into the learning process. Collaboration implies taking the best information from multiple sources like the organizations previously identified in the article.  Evaluation is the final cornerstone as programs that are not evaluated, rarely provide information about the full impact of the student learning process. Centers will teach teachers how to ensure their students are prepared to make informed financial choices and become responsible workers, heads of households, investors, entrepreneurs, and citizens.

A key goal will be to make financial literacy learning “stick.” Relevant lessons are necessary to prepare students to be financially literate adults. We are currently working with several national groups to garner support for these centers, including government entities and private sector financial organizations. We must accept the fact that teachers will need high-quality professional development opportunities in order to address our nation’s financial literacy shortcomings. The centers will provide, develop, document and advance the best teaching practices of financial literacy.

Literacy in schools often refers to reading, writing and arithmetic. However, real life learning, as demonstrated by our current economic crisis, reinforces our belief that the teaching of financial literacy should no longer be an option for the children in our nation’s schools. Our job is to help teachers integrate financial literacy into mandated curriculum and to make use of visual tools as a vehicle for helping students process information they will apply to their daily living.

Now is the time for a national consensus to emerge empowering us to address the critical issues before us. It is imperative we act soon to involve educators and the general community in the implementation of high-quality financial literacy programs in our nation’s schools. Professional development that is both focused and sustained is the only proven vehicle for helping teachers to achieve our nation’s goal of building a citizen base of informed consumers who will avoid the excesses that led to our most recent fiscal crisis.

Gerald Lauber Ed.D.

The Thinking Foundation and the Teaching Financial Education Group