Personal Finance Courses: Proof but No Action

Positive results lead to … no change

personal finance education, personal finance articles for high school students, personal finance for young adults

Few states require that high school students pass a course in personal finance in order to graduate. I’ve lamented that for years.

What’s sadder is that research shows that such mandated courses actually work.

The most recent study, funded last year by the Financial Industry Regulatory Authority’s Education Foundation, found notable improvements in credit outcomes for young adults who were exposed to rigorous financial education programs in school.

The study was conducted by researchers at Montana State University, the Center for Financial Security at the University of Wisconsin-Madison and the Federal Reserve Board. It found that financial education courses improve the credit scores of young adults and lower the probability of credit delinquency.

The study focused on three states that require financial education in high schools (Georgia, Idaho and Texas) and compared the change in credit outcomes for young adults in those states with young people in adjacent states where no such education was implemented. The researchers analyzed credit behavior of the subjects from age 18 until they were 22.

The study found that:

  • Credit scores improved by 11 points in Georgia, 16 points in Idaho and 32 points in Texas, translating into 2%, 3% and 5% increases in those states, respectively.
  • Three years after the states implemented their financial education mandates, 90-day delinquency rates on credit accounts decreased in all three states.
  • Texas had the largest decrease. Those who received the financial education in Texas had one-third fewer severe delinquencies by the third year. 

Yet only 16 states require high school students to complete a financial education course in order to graduate, according to the Council for Economic Education. And only six require that the students take a test proving what they’ve learned.

Maybe the results of this study will move more educators to raise the financial education bar in their states.

At least we can hope so.

Originally published in Inside Personal Finance October 2015

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