Key takeaways
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A complete education should incorporate skills that prepare students for future success. Many school districts create learner or graduate profiles to encapsulate the capabilities they want to cultivate in their students. Examples include clear communication, personal responsibility, continuous learning, and critical thinking. All of these areas are part of financial literacy.
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The current generation of students is concerned about their financial future. By providing the relevant financial literacy competencies before high school graduation, they can immediately apply these life skills. The ability to budget, save, invest, set goals, and develop strong monetary habits will serve students in the short and long term.
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Providing students with a background in multiple literacies, including financial literacy, will allow students to see the personal impact of their learning. Financial literacy is a perfect way to move from conceptual understanding to full integration within a student's future life.
One of the main goals of the US educational system has always been literacy. In the traditional sense, literacy is the ability to read and write. However, the purpose of literacy is to enable individuals to understand and interact effectively with the world around them. With this expanded definition in mind, students are exposed to literacy across a variety of fields, including media, health, and financial literacy.
The incorporation of financial literacy into public education provides students with a framework for success in their adult lives. The skills embedded within financial literacy align with multiple content areas within the school curriculum. School districts strive to teach and strengthen skills in areas such as self-management, problem-solving, and critical thinking through primary and secondary school.
What is Financial Literacy?
Financial literacy is the knowledge and behaviors that allow a person to make sound decisions about money. Traditionally, the acquisition of this knowledge and skill set was reliant upon family members. A child or young adult might not be exposed to financial understanding until it was time to make real-world decisions.
Financial literacy is a term used to connect practices to build financial stability. Most experts agree that the main components include budgeting, spending, saving, investing, planning, debt management, credit and borrowing. The principles in these areas might not change for new generations, but the tools to manage wealth have evolved.
- Budgeting is creating a plan for balanced expenses and spending. It is important for a young adult to understand how much money is coming in versus how much is going out. This understanding allows for decisions about purchases of both wants and needs. The concept of spending relies on calculations of fixed expenses that can be expected, as well as variable expenses that could occur.
- Credit is the ability to borrow money, which will need to be repaid with interest. There are revolving credit accounts with a limit or loans which are usually disbursed in one lump sum. It is important that a borrower understands the terms of their credit repayment.
- Saving is a way to build wealth to create financial security. By having money saved, a person can plan for the future as well as prepare for emergencies. One way to increase savings can be through investments. This approach can lead to more financial returns later but does come with risks based on the specific details of the investment.
- Debt is the money that a person has borrowed and now owes. Experts stress the difference between good debt and bad debt. Good debt should increase your net worth over time. These are often purchases or loans that will provide a positive return, such as mortgages or student loans. With student loans, it is important to ensure that the loans are manageable and can be paid responsibly. Bad debt relates to items that depreciate after their purchase, meaning there is no return on the money spent.
Why is financial literacy important to teach?
Financial literacy is important because it can provide stability in life. By introducing children and young adults to concepts pertaining to money, they can make informed choices allowing them financial freedom in the future. Recent findings show that adults between 19 and 29 years of age have accrued over one trillion dollars in debt. By providing basic knowledge as part of a public education, future generations can start their financial journeys on the right foot. By incorporating financial literacy into existing curriculum, educators can create student-centered learning with real-world applications.
10 Engaging Financial Literacy Activities
Online Games and Apps: There is no shortage of games and apps online to help students learn about and practice financial literacy skills. As a parent or educator, be sure you are selecting a trustworthy site and that the content is age-appropriate.
Elementary School Activities
Handling Money: The early elementary years are a great time to introduce students to coins and bills. Rather than just learning how to count money, consider giving students “play” money to trade for items they might want from a treasure box or school store. This is great practice for saving versus spending.
Class Stores: Let students see both sides of the consumer process. Have students create a product that they can make and sell at school. They will need to consider how much their materials cost and how much they can charge for the product. This is also a great way for students to raise funds for a local charity or community organization.
Stock Market Game: Developed in the 1970s, it has been used by teachers for years. There are simple versions that ask students to track a particular stock, and more sophisticated events that are actual state competitions focused on making the best investments in the current market.
Middle School Activities
Shark Tank: This activity covers a variety of content areas in a fun way. Students can work independently or in groups to develop, market, and plan the production of a new product. All students are given the same starting budget, and the best ideas and investment decisions win.
Emergency Funds: Even with preparation, things can happen. This activity is an important way for students to consider how they will manage their money in emergencies. All students start with the same amount of money, but they draw different cards that create emergency situations. This lets students consider what they can save and what they have to spend.
Class Salary: Assigning students classroom responsibilities is not a new idea, but in this activity, they will receive a paycheck for their work. Teachers will then create scenarios where students can save, spend, or invest their money. This activity can be done in a single day or over an extended period for a more meaningful experience.
High School Activities
Building a Budget: As students get older, they can consider more elements of financial planning. By creating their own budget, they will need to understand salaries, housing, bills, credit, long-term goals, and immediate needs. For additional interest, consider allowing students to select their occupations (but don’t forget they need to pay for college or career training).
Practice Purchases: High school students are getting their driver’s licenses, so this is a perfect age to practice buying a car. Students should compare the cost, loans, and interest rates of their dream car with those of a more modest option. They can also factor in the ongoing costs of ownership, including insurance, maintenance, and gas.
Learn How to Read (Financially): Once students grasp the general concepts of financial literacy, it’s time to let them read. Provide students with the terms and conditions of different credit cards, loans, mortgages, and investments. Have the students create their own method for making the best choices, and then take some time to highlight sustainable choices.
