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How Money Works: Why Our Kids Don’t Get It and What We Can Do About It

By Bob Moritz

U.S. students, for the first time, recently took a large-scale international test to see how their financial literacy skills stack up against their global peers. We’ll soon get the results, and I’m worried.

In the U.S., we haven’t done a good job teaching kids how to be financially savvy — how to handle debt, be good consumers, and learn smart saving and investment strategies. These are basic skills young people need not only to be successful in life, but also to be successful as they enter the workforce or decide to become entrepreneurs or leaders in their communities.

At the same time, American companies are struggling with a talent gap. Businesses are finding it hard to recruit and retain employees with the skills and knowledge needed to run their organizations. In fact, in PwC’s recent CEO survey, 80 percent of CEOs cited talent availability as a problem. Lagging financial literacy among young people, our future talent, makes matters so much worse, especially in an era in which markets, economies, and the challenge of public and private cooperation becomes increasingly complex.

Consider the situation from an employer’s perspective: Someone who can’t create and stick to a budget will likely have trouble managing a company’s finances; and someone who makes unwise spending choices is not the person you want making on-the-job purchasing decisions. Businesses want educated workers as well as educated consumers.

The time is now

April is National Financial Literacy Month and it’s as good a time as any to take a hard look at the facts: nearly 34% of teens are unsure about their ability to invest money and the percentage of teens who feel they will be financially dependent on their parents until age 25-27 has more than doubled since 2011, from 12% to 25%, according to a just-released Junior Achievement survey of teens. Young people are saddled with far more student loan debt than previous generations. At the same time, they borrow much more heavily on their credit cards and repay that debt at slower rates than their parents and grandparents, according to a study published in the journal Economic Inquiry.

If we — business leaders, educators, policymakers, and parents — do not work together to help young people become more financially astute, they could make mistakes that last a lifetime, and America’s economy and its businesses will suffer.

For instance, a new study by Harvard and Stanford researchers found our highest-achieving low-income students — those with the grades and scores to get into the very best colleges — aren’t even bothering to apply to top schools. Why? The study shows those students don’t know about the financial aid they could get and simply have never met anyone who went to an elite college.

I didn’t have top grades when I graduated from high school, and I nearly made a similar misstep because I didn’t understand the value of a college degree. Like many young people from working-class backgrounds, I was the first in my family to go to college. And before I left home for SUNY-Oswego, I had a job in the stockroom of a clothing store. I liked the paycheck and couldn’t fully grasp why I should give it up for what I thought was just the possibility of a better job four years later. I seriously considered putting off college so I could stay home and work in that store. My father had greater aspirations for me, and that changed my future.

Hopefully, most parents would guide their kids in the same way, but some young people aren’t as fortunate. Parents in general feel uneasy talking with their kids about money. More than two-thirds say they feel less prepared to give their teens advice about investing than talking with them about the “birds and the bees,” according to a Schwab survey. I recognize it may be easier to watch a movie with your kids than talk about building a budget around their allowances, but both activities are important. Families need to become more comfortable engaging in these conversations.

Our kids’ teachers also lack the confidence that they can help. Few believe they are adequately prepared to teach financial education, according to a University of Wisconsin study. But the business community should and can lend its expertise by leveraging its assets.

Resources are available

Last year, PwC launched Earn Your Future, a $160 million program to boost financial literacy in schools. We offer professional development to teachers and have created a free financial literacy curriculum for grades 3–12. Thousands of educators across the country are already using the materials, and the early reports are positive. Ninety-five percent of teachers who participated in a recent three-day training session we helped lead said they felt much more comfortable teaching financial literacy and business after taking part in the program. I’m so grateful to the PwC employees who have contributed their time to this effort.

Fortunately, we’re not the only ones trying to address the problem. The Council for Economic Education has developed rigorous new K–12 standards for financial education that state policymakers should require in their schools if they want to develop a competitive 21st century workforce. Many companies and their leadership teams are jumping in to do their part.

Math and finance can easily be taught together. A big emphasis of the new Common Core State Standards, which most states are adopting, is on getting students to do real-world math problems. I can’t think of more important real-world problems than building a budget, starting a business, investing, or donating wisely.

I often wonder what would have happened if I didn’t go to college but stayed in that stockroom after high school. Of course, I might have gone a year or two later, and it’s possible I’d still have a successful and rewarding career today. But it’s also possible that I’d be on a very different path. I envision an educational environment in which any young person faced with that kind of choice — or another decision that could dramatically affect his or her economic future — has the support and financial education he or she needs to make the right call.

Bob Moritz is PwC's U.S. Chairman and Senior Partner. Through PwC's Earn Your Future initiative, the firm will contribute $60 million and one million service hours to educating youth and improving financial literacy over five years.