ANNAPOLIS – With the economy in the tank, some financial experts say that many Americans do not know the answers to simple economic questions addressing everything from the difference between gross and net pay to which type of investment carries the most risk.
High school students, however, may soon be able to answer these questions as administrators push to increase students’ knowledge of the economy and personal finances.
In Maryland, eight out of 24 school districts offer mandatory courses devoted partially or entirely to discussing personal finances, including those districts in Talbot, Baltimore and Carroll counties. A ninth school district, Caroline County Public Schools, is in the process of adding the requirement.
“Most of the other school systems have courses that kids can take, but they’re not required,” said Allen Cox, managing director for the Maryland Coalition for Financial Literacy. The coalition assists schools in adding personal finance classes to their curricula, offering teacher training and other services.
Some people think that including financial education in schools is important because that information is not always taught elsewhere.
“We depend on our educational system to do things that not enough parents do on their own,” said Elinda Kiss, a professor in the finance department at the University of Maryland, College Park. “I know there are people who are parents that aren’t financially literate.”
Kiss also said there is value in teaching personal finance to people while they are still young.
“I see so many college students who have incredible credit card debt because they don’t understand notions of credit cards,” Kiss said.
In 2004, the average college student credit card debt was $2,169, up from $1,879 in 1998, said a 2005 study published by Nellie Mae, a student loan company.
Some teachers are also grateful that the course requirements are becoming more common in high schools.
“I’m so happy, it’s not even funny,” said Kate Rudy, who teaches a mandatory half-credit financial literacy course at North Carroll High School, in Hampstead.
The class, designed for juniors and seniors, deals with the real-life application of financial concepts and includes discussions of taxes, insurance and housing choices. Students also design a spending plan based on careers suggested by job placement tests.
“I wish more people had taken it earlier,” said Rudy, whose students participate in a financial literacy test both before and after the course to measure their achievement.
The Financial Fitness for Life test assesses students’ knowledge of decision making, earning income, saving, spending and credit, and money.
“They’re kind of surprised by the things they read on there,” said Rudy, referring to students when they first encounter the test. “They’ve always improved.”
Results from the approximately 3,000 students from four Maryland school systems who took the test during the 2007 to 2008 school year, show that economic education is successful. The average pretest score for the test as a whole was 41.5 percent correct. The average post-test score rose to 49.4 percent.
The report and analysis of these results was presented to the Task Force to Study How to Improve Financial Literacy in the State, which was established in July 2008. The task force will suggest ways to increase financial literacy of consumers in Maryland and will present the merits and drawbacks of teaching the subject in public schools.
The task force, schools, and other interested parties are working to find the best solution to increasing financial knowledge.
“People who graduate from high school who’ve never had finance do not understand basic finance,” Kiss said. “Someone needs to teach people to be responsible.”