New Standards for Financial Literacy

Mary Pille, Junior Achievement of Central Illinois

Personal finance education is best when started at a young age.

Money management is a life skill that, unfortunately, doesn’t come with a standard manual. If it did and everyone followed the rules, we would all have flawless credit and no debt. But as we know, that is certainly not the case these days.

Peoria was one of 2,854 cities included 2017’s Best & Worst Cities at Money Management, a report by WalletHub. Peoria ranked #1,075 of the cities analyzed in the study. Its metrics and scores were as follows:

  • Median credit score: 660;
  • Credit card debt-to-income ratio: 7.11%;
  • Mortgage debt-to-income ratio: 314.6%;
  • Car loan debt-to-income ratio: 45.99%;
  • Student loan debt-to-income ratio: 58.85%; and
  • Average number of late payments: 2.94.

With these kinds of statistics, it is clear that we have some work to do in our own backyard. Meanwhile, at the national level, the National Financial Educators Council website reports that:

  • 57% of college graduates plan to move back in with their parents (MonsterTrak);
  • 62% of college graduates expect to leave school with an average $27,236 in student debt (The Student Monitor);
  • 39% of American adults have zero non-retirement savings (National Foundation for Credit Counseling);
  • 56% of adults do not have a budget (NFCC); and
  • 35% of Americans with access to credit have debt in collections (The Urban Institute).

Combined, these and other factors have resulted in the inability of too many Americans to be financially secure enough to save for retirement, cover medical expenses, or deal with unexpected emergencies without risk of bankruptcy or other financial challenges.

So how do we change the cycle? By beginning appropriate financial literacy programming at a young age, there is evidence that we may be able to reverse these staggering statistics. According to J. Michael Collins, assistant professor of consumer science at the University of Wisconsin-Madison, two studies—of 10-year-olds and students in grades three to five—show financial literacy gains in knowledge and behavior, but the programming has to be well implemented. If financial literacy was taught rigorously from grades three to 12, it seems likely to lead to better financial planning and money management behaviors.

There is some good news for K-12 students in Illinois. This fall, schools will begin implementation of new Social Science Learning Standards that include financial literacy. According to the Illinois State Board of Education, the social sciences help young people develop skills transferrable to success in college and careers, including creativity, critical thinking, problem solving, global awareness and financial literacy. Most importantly, they will emerge with the knowledge, skills, attitudes and behaviors necessary to be informed and effective citizens.

These new standards are right in our wheelhouse, as one of the three pillars of Junior Achievement is financial literacy. JA brings volunteer role models from the community into the classroom to share their experiences with young people. Through JA’s financial literacy curriculum (offered in grades K-12), these volunteers help students better understand how money works. And with research indicating that nearly 90 percent of JA alumni—across all JA programs—are confident in managing their finances, it appears to be effective. iBi

Mary Pille is president of Junior Achievement of Central Illinois. For more information, call (309) 682-1800 or visit centralillinois.ja.org.

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