As we reported this week in our story on financial literacy, the PISA international survey recently found that American teens scored in the middle of the pack when it came to answering finance-related questions. We turned to two financial literacy experts to discuss how teachers and parents can help make money lessons stick. Annamaria Lusardi, professor of economics and accountancy at the George Washington University School of Business and academic director at the Global Financial Literacy Excellence Center, which hosted the U.S. release of the PISA data in collaboration with other organizations, as well as Shannon Schuyler, corporate responsibility leader at the public accounting firm and consultancy PricewaterhouseCoopers, who was a panelist at the PISA event, shared their takeaways with U.S. News:
1. The problem is dire and widespread. The survey found that 18 percent of the American 15-year-olds surveyed could not answer basic financial questions or handle simple tasks, like understanding an invoice. "In the United States and around the world, young people know relatively little about basic skills that are necessary for managing money. We see that in almost every country," Lusardi says. The United States has one of the most developed financial markets in the world, and "a country with the most developed financial markets should not be average, given the decisions young people are already asked to make," like whether to take out student loans, she adds.
2. Adding personal finance classes to school curriculum could help. "For this generation, I don't think there is any solution other than putting financial literacy in schools," Lusardi says. Just as students learn math and English, they should learn financial literacy because it is also a basic skill that young people need, she argues. Although research on the effectiveness of financial literacy courses is mixed, Lusardi says that doesn't matter. "I don't know that teaching literature and math is effective, but nobody seems to worry about that," she says. In other words, personal finance is so important that it should be part of a curriculum, regardless of whether it's proven to influence later financial decisions or not.
Lusardi says the topic should be taught starting earlier than high school, and that the lessons should also be incorporated into college coursework. "What if when young people started their first job, they already [knew to] put money into their retirement account? If young people could do this at age 20 rather than age 50, it would make an enormous difference," Lusardi says.
Schuyler says personal finance classes can also be integrated into other lessons, including history. "What happened to the finance system in the Great Depression? How do you teach those things in a combined way?" she asks. She adds that students can also benefit from lessons that are relevant to their lives, like how to determine the difference between wants and needs at the mall. PwC has invested $160 million, including $60 million in cash and 1 million service hours from employees, to help promote financial literacy in schools. Through those efforts, it has reached over 1.1 million students.
3. Parents need help, too. Lusardi notes that the PISA survey found a correlation between socioeconomic background and financial literacy levels in the United States. "The people who know the most have parents with a college background and higher socioeconomic background," she notes, adding that leaving financial education to parents "creates disparities from the beginning."
One of the best things parents can do is advocate for financial literacy in their school district, she says. "Perhaps the local business community can pay for training teachers," she adds.
Some lessons, though, are simple enough even for a toddler to grasp. Schuyler says that with her 19-month-old son, she's already imparting lessons about sharing toys and delayed gratification, by giving him the option of one treat now or two later. "Some of those things you start to bake in -- that you can't always get what you want or that you're looking out to the future," she says. Then, parents can build on those lessons as their children grow, incorporating piggy banks for savings, for example. "It's important for parents to talk about their financial situation in a positive way. ...If parents are willing to have this conversation, it goes a long way," she adds.
4. Money lessons can be fun. "The topic can be pretty fun and intriguing, like talking about people who made money and lost money," Schuyler says. Training doesn't work as well when a topic like the stock market is taught in one lesson and is never revisited again, she says. Instead, she envisions ongoing lessons that are related to topics students care about, a goal of the PwC financial literacy curriculum.
5. Certain groups of people need special attention. Schuyler says PwC continues to expand its curriculum for specific groups, including veteran organizations, students with special needs like autism and parents themselves. "It's really blossomed into this large, connected initiative, and we keep seeing ways and tentacles for it to grow," she says.
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