The financial crisis of 2008-09 has prompted proposals in many states to add financial literacy requirements to the high school curriculum. This sudden fervor for teaching our children personal finance presents pitfalls and opportunities for educators.
First, some of the pitfalls: Much of the rhetoric from politicians advocating financial literacy requirements is misdirection. For example, Maryland Comptroller Peter Franchot advocating in The Baltimore Sun for a proposal in the Maryland legislature wrote:
“Thus, in far too many instances, we entered into financial commitments that we couldn’t afford, with terms and conditions that we didn’t truly understand, in order to buy things that we really didn’t need. If more Marylanders had the benefit of sound financial literacy education, fewer of our friends and family members would be facing the loss of homes and life savings today.”
This line of reasoning makes no sense. No amount of knowledge will fix dishonesty and deceit. After all, the executives at failed companies such as Countrywide, Bear Sterns, Lehman Brothers, and AIG, were all knowledgeable, sophisticated investors whose greed led to disastrous financial decisions that bankrupted their companies. Knowledge alone will not substitute for good character and good judgment. It’s naive to think that better financial education for the average person will prevent future financial crises when the most financially astute among us made even worse decisions. It’s misdirection to blame consumers for the failure of a financial system run by business executives and politicians who knew better and refused to take responsibility for their actions.
Another pitfall is what I call the “check-box approach to education.” That is the continual addition of stand-alone requirements that students view as hoops to jump through rather than education to be obtained. Too much of the school curriculum consists of lists of facts to memorize, presented as distinct and separate from each other. There is little integration between all the lists so students often fail to see the relevance of anything that they are required to learn.
But, it is from this second pitfall that I see opportunity. Personal finance education is a laudable goal, even if the motives of its advocates are suspect. However, financial literacy should be integrated into the current math curriculum rather than taught separately. Such an approach would have the added benefit of showing students that math is relevant, because knowledge of math leads to personal financial gain.
Of all the school subjects, math presents the most difficulty because students often don’t see its relevance. The truth is much of what is taught in math class is not relevant. Students rarely see adults using the quadratic formula, computing with imaginary numbers, proving trigonometric identities, or solving systems of algebraic equations, for the simple reason that most adults have no need to do these kinds of problems.
However, everyone makes decisions in the marketplace and most of these decisions require comparing numbers. Too often consumers make poor decisions because they fail to understand the context of financial numbers. A large part of this problem arises because our schools fail in teaching students “quantitative literacy,” which is educational jargon for facility with numbers and arithmetic. But quantitative literacy is the most important of all mathematical skills because it is the one area of math that impacts all of our lives, each and every day.
A large fraction of my writing and speaking has focused on quantitative literacy applied to personal finance. In my book, “The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy”, on Websites I’ve authored such asComputeGasSavings, and in talks and seminars I’ve presented, my goal is to completely change the way people think about numbers when they make financial decisions.