Finance guru Dave Ramsey – who filed for bankruptcy at age 26 – is the face of personal finance for more than seven million students in high schools across the country. That’s partly thanks to the 26 states now requiring financial literacy courses for high school graduation.
With schools already struggling to fill teacher vacancies, the responsibility for teaching personal finance often falls to not-so-financially literate history teachers or gym teachers, who end up showing a semester’s worth of videos from experts like Ramsey.
While a lack of faculty expertise is part of the uneven process, financial experts say a lack of financial literacy across the country is to blame.
The country is doing 18-year-olds a “disservice” by allowing them to apply for $100,000 in student loans — without them or their parents having the financial skills to know the lifelong impact, says Michael Roberts, a professor of finance. at the Wharton School of the University of Pennsylvania.
“It has long been recognized that financial education is critical to being an engaged and hopefully prosperous and happy citizen,” Roberts told us. Fortune. “When you think about the importance of finances to your life, to my life, to our lives, it really is unavoidable.”
According to the Global Financial Literacy Excellence Center and TIAA, most adults make financial decisions with low levels of financial literacy, with Gen Z having the worst literacy. Those born between the late 1990s and early 2000s could answer only 37% of questions on topics such as borrowing, investing and saving. This is staggering when you consider that one in seven Gen Z credit card users has maxed out their cards, and in the US alone, students owe more than $2 trillion in student debt.
Overall, one in four Gen Zers don’t feel confident in their financial knowledge and skills — and more than a third say their parents didn’t set a good example for them financially, according to WalletHub.
However, not everyone agrees that classes dedicated to personal finance are the best use of students’ time.
A widespread study finds that “there is little evidence that education designed to improve financial decision-making is successful.” Instead, it suggests that greater math training may later lead to greater market participation, investment income, and credit management. Another study said that “interventions to improve financial literacy explain only 0.1% of the variance in the financial behaviors examined, with weaker effects in low-income samples,” and that the required courses are negligible due to the speed at which students may forget what they have learned.
However, both studies were written more than a decade ago – when only about five states mandated financial literacy. Now, 21 additional states have met financial literacy requirements.
Billy Hensley, president and CEO of the National Endowment for Financial Education, explained that some of the division has been caused by a historic lack of data and the dominance of a small number of studies. Today, he added, the evidence is overwhelming: Financial literacy education works – when it’s done right.
He points to NEFE research, which shows in part that students who take state-mandated financial education courses are 21% less likely to carry a credit card balance, have an average of $1,300 less in private loans and are 3.5% more likely have to take on a credit card balance, financial aid out.
As a growing number of states require personal finance courses, school districts across the country have had to scramble to find qualified teachers. Yet in many states, teachers are not required to demonstrate expertise in this area before being placed in a personal finance classroom.
This summer, California became the latest state to add a financial literacy requirement to its curriculum. Teachers in social sciences, business, math and home economics are specifically authorized to teach the course, but the new law also gives teachers in other subjects the authority to oversee personal finances.
Roberts said he is “very concerned” about who is teaching personal finance across the country. While it may be easy to learn some things, like what a checking account is, students need to learn financial skills to actually be able to read and write. For example, young adults should be able to distinguish whether it is better to buy or rent a house, or to take out a fixed or variable rate mortgage.
“You have to teach the teachers,” Roberts said. “It all has to start there, and the best way to do that is for them to take the course themselves, because how many teachers are actually trained and have formal training in personal finance? I doubt a lot of people.”
Ramsey, who has more than 2.4 million TikTok followers, agrees that financial literacy in schools is “crucial” but says personal finance is 20% rote knowledge and 80% behavioral. His personal finance curriculum is taught in more than 45% of U.S. high schools.
“Too many students enter adulthood with debt, which leads to stress and anxiety, and it’s just not worth it,” Ramsey says. Fortune. “The younger you learn to manage money, the faster you can build wealth and make a difference in your family tree.”
In the absence of a national strategy, individuals often turn to social media and influencers for financial advice, Hensley says.
However, one study found that 27% of social media users have fallen for false or misleading financial information, with younger adults more likely to do so. Only one in ten financial influencers on TikTok is transparent about their background.
“FinEd is not one-size-fits-all and you can’t believe everything you see/hear online or in any other medium, and there are no surefire ways to build wealth or financial security quickly. And the more popular a particular influencer becomes, the more likely they are to be paid by certain brands, which can influence what they tell people,” Hensley said.
While Hensley doesn’t believe educational institutions are to blame, he said the economic system is broken and has led to systemic abuse of certain low-income Americans.
In a similar vein, Timothy Ogden, the director of the Financial Access Institute, wrote in an op-ed that America’s finances are in trouble because “the costs of higher education, health insurance, childcare and rent have all risen much faster. then paychecks.”
However, Ogden and Hensley are on opposite sides of the debate over financial literacy education requirements. Ogden argues that greater knowledge of budgeting or interest rates will not necessarily change behavior; Hensley, on the other hand, believes that financial literacy can have a real positive impact.
Instead of spending time taking sides, Hensley says energy should be spent improving the financial system for everyone.
“Everyone (has) had at least one point in their life where they wished they had known a lot more about personal finance than they did,” Hensley said.
