Utahs financial literacy requirement


States want to be trendsetters, but not all trends are worth bragging about. That was Utah’s predicament from 2002 through 2004, when the Beehive State ranked No. 1 in the country in personal bankruptcy filings (adjusted for population). However, the story behind the numbers was even more disturbing.

“We saw a younger demographic that was filing for bankruptcy year after year,” says Preston Cochran, president of the AAA Fair Credit Foundation, a national financial services nonprofit.

Business leaders like Cochran quickly teamed up with state officials to make sure that young people would leave high school with the basic skills to manage their finances. At the time, only a few Utah schools offered personal finance classes as an elective. So the state passed a law requiring that by 2008, all high school students had to pass a semester-long personal finance course to graduate.

A graduation requirement sends a powerful message, says Julie Felshaw, the financial and economics specialist in the Utah State Office of Education who developed the general financial literacy curriculum: “We say we value American history and we value algebra. Now we say we value financial literacy.”

Missouri and Tennessee also require high school students to take a personal finance class. Many other states, most of them in the West and South, embed core personal finance or economic concepts in other subjects like math or social studies.

Students have some catching up to do. In 2008 the Jump$tart Coalition for Personal Financial Literacy’s biennial survey of high school seniors painted a grim picture of financial awareness nationwide. For example, only 13 percent of students knew what the ramifications are for a credit cardholder when a thief runs up huge charges. (See the sidebar to find out if you do.) Overall, Jump$tart found that students correctly answered only 48 percent of the questions, down from 52 percent in 2006. The highest score in past surveys was 57 percent in 1997.

Many states have established financial literacy requirements only in the past few years, so it’s tough to gauge what impact required courses will have on what young adults know about money matters. But faced with a daily diet of grim economic headlines, most educators want to start somewhere.

“Looking at a thousand kids over a decade’s time, the message is they don’t know enough about personal finance,” says Laura Levine, Jump$tart Coalition’s executive director.

Back to basics

The first order of business for most teenagers with cash to flash is simple: What can I buy this week? Gayle Whitefield knows that mindset. To prod her students into smart choices, the general financial literacy teacher at Riverton High School, in a suburb of Salt Lake City, had them track all of their spending for one month.

To her surprise, one student revealed that he saved $400 just by tracking his purchases and not buying unnecessary things. Discovering the advantages of saving is one of the first lessons financial literacy educators try to get across to teenagers. “Students have an ear for money,” says Whitefield. “They want to know how they can get more of it, how they can hold on to it and really make it worth more.”

The national economic crisis is another hot topic. In early October, Whitefield’s students turned into Wall Street traders for the Stock Market Game, an online stock trading simulation, just in time to see the market take a dive — right along with virtual investments that had been worth $100,000. “You guys are just investing fake money,” Whitefield told them. “How do you think your parents feel?”

In Utah schools, 11th- and 12th-graders study financial planning, money management, career and education planning, and ways to prepare for retirement. Teachers tend to focus on the nuts and bolts of personal finance. Whitefield’s students spend most of their time on checking accounts, online banking, and other electronic transactions. They learn to reconcile a checkbook against a bank statement — by hand. The veteran business and marketing educator says students will pay more attention to a checking account if they do the calculations themselves rather than relying on a computer to do the math. She also tackles financial values, goals, and topics such as understanding the influences of advertising and marketing on spending.

Shaping attitudes and skills about money shouldn’t wait until a 17-year-old takes a one-shot high school class, says Felshaw, the curriculum specialist. To that end, the Utah lawmakers took another decisive step last year to bump up financial literacy, requiring education officials to integrate financial and economic concepts into the K-12 curriculum.

Once every student is in a course, the challenge for Utah, as well as any state weighing deeper investments in financial education, is improving teacher preparation and training. Right now, any teacher who specializes in business, marketing, agriculture, social studies, family and consumer science, or math (Algebra II and higher) can teach the course. Focused financial literacy training is optional. Utah teachers can use any available curricula (and the range of materials from nonprofit, private, and government sources is vast) as long as they cover the required standards and local school district officials approve.

Tyrone Frazier, a University of Utah graduate student, recently completed an online survey of nearly 60 financial literacy teachers and 1,100 students as part of a statewide evaluation of the program. The increased attention to life skills gets a positive response from teachers and students alike. “The program is fantastic,” he says.

But there are struggles. A high school course is too short for students to master the nuts and bolts, Frazier found. Devoting a week to checkbooks can bore students, so teachers should consider focusing more on problem-solving and research skills. But without specialized training or a required curriculum, teachers may not be able to convey more difficult concepts like investing or accounting. Training should be mandatory, argues Whitefield.

Financial literacy also needs to find an academic home that would make it easier for teachers and administrators to share information about how their students are reacting to what’s being taught. In Utah, since teachers in six disciplines can teach the course, no one really owns the subject. Only one district in the state has formed a financial literacy department.

The most pressing question in financial education is whether these classes make a difference, especially once students move on to real-world decision making. Frazier’s study found that 53 percent of students agreed that the course improved their financial behaviors. But few studies have charted longer-term impacts.

“If education resources are scare, which they appear to be, it would appear to be a waste of time and money to require such a course until we learn how to teach [it],” says Lewis Mandell, a senior fellow at the Washington, DC–based Aspen Institute’s Initiative on Financial Security. Mandell, who conducts and analyzes the Jump$tart surveys, argues that there is no evidence that high school financial management courses, even those that concentrate on decisions relevant to students (like choices between spending on junk food or saving for a laptop), improve financial literacy.

States are just beginning to track student progress in personal finance courses. Three years ago, Missouri instituted a personal finance graduation requirement for the class of 2010. Like Utah, Missouri is still in the early stages of evaluating how all this plays out. Last year Missouri officials piloted optional online pre- and post-tests for students in personal finance courses. Schools are just starting to use the tests, so there aren’t concrete statewide results yet. Since teachers take a dim view of required testing (largely because of No Child Left Behind mandates), the department encourages them to treat this test as an instructional tool that can be used to prepare for the next semester’s course, says Stan Johnson, an assistant commissioner in the Missouri Department of Elementary and Secondary Education.

Taking stock

Back on the East Coast, teams of students at Wilmington High School are also engrossed in a stock market game — this time in mid-November, when the Dow lost over 800 points, more than 10 percent of its value, over a two-day period. This is the first year for financial literacy courses at the school, and Susan Canty is working on the concept of market volatility.

“If your stock keeps going down,” says the teacher as she navigates the classroom, “how low will you go — 10 percent, 20 percent, 30 percent — before you get rid of it and buy something else?” She also covers the basics, dedicating about 20 percent of her teaching to checking accounts and the like.

Hunched over computers, two young women congratulate themselves on their picks. “ExxonMobil is doing good,” says one. “Yeah, this week,” says her teammate. Should Massachusetts students be required to take a financial literacy class? Before the period ends, I ask them. Everyone votes yes.

Rep. Sean Curran, a Springfield Democrat, has been “very impressed” with Utah’s work on financial literacy. But personal finance is only an elective in Massachusetts high schools, and so far a statewide requirement is a dead letter. Two bills mandating personal financial literacy died in committee last session, as did Curran’s proposal for a universal curriculum pilot in 12 cities. Mandating personal finance during difficult budget years may be problematic, says Rep. Brian Dempsey, a Haverhill Democrat, who also proposed a requirement.

The rest of New England is also behind the eightball in financial education. No states mandate personal finance courses, and only New Hampshire requires economics education.

Most other states are more prescriptive about curriculum and graduation requirements than Massachusetts, according to Elementary and Secondary Education Commissioner Mitchell Chester. Bay State school districts and school committees establish their own requirements, and the only subjects mandated by law in Massachusetts are American history and physical education.

In reality, Massachusetts has a two-pronged approach to financial literacy. First, there’s a galaxy of programs supported by nonprofits, government agencies, banks, and financial services companies available in the Bay State. The Office of Consumer Affairs and Business Regulation sponsors one, the High School Financial Literacy (HiFi) initiative, launched in 2005. Consumer Affairs coordinates teacher training based on the National Endowment for Financial Education’s free curriculum, used by schools like Wilmington High. To date, more than 5,300 students have taken courses through the agency’s program.

The downside to this voluntary approach is that there are still tens of thousands of students in hundreds of schools that are not in these programs, says Scott Guild, the Federal Reserve Bank of Boston’s director of economic education. (There are more than 140,000 juniors and seniors in Bay State high schools.) Guild and other financial literacy advocates met last fall in Boston for the first New England Youth Financial Education Forum, to develop strategies to coordinate and improve financial education in the region.

Second, there’s the move to embed financial literacy in other subjects. The Massachusetts Board of Elementary and Secondary Education’s Task Force on 21st Century Skills has called for financial, economic, and entrepreneurial literacy to be integrated into major curriculum areas.

State education officials are revising the Massachusetts Curriculum Frameworks, the standards that guide how various subjects are taught in schools, and financial literacy is on track to receive greater prominence in math classes. But there’s a catch: The frameworks are voluntary. State officials could recommend, for example, one course in personal finance as part of four years of high school math, but that doesn’t mean local school administrators will follow suit.

“The tough [economic] situation right now argues for greater emphasis on financial literacy, but people will be very sensitive to imposing new requirements on school districts at a time when [they] are really feeling the pinch financially,” Chester says.

Some proponents of financial education also see the state’s MCAS exam as an obstacle, citing the constraints the test places on schools’ ability to schedule financial literacy enrichment programs. But few high school teachers or administrators agree. Most juniors and seniors who passed the exam have time available for other courses, they say.

Innovative ways to fund financial education are out there. (After recent budget cuts, the HiFi program costs a modest $9,300 in fiscal 2009, largely for teacher training.) Three years ago, the Connecticut Department of Banking agreed to steer the money from fines on financial institutions directly to their Department of Education in order to increase elective financial literacy courses. Education officials currently oversee a $2 million, five-year grant program, and school districts that don’t already have a course for high school juniors or seniors can apply for funds. Massachusetts Treasurer Timothy Cahill says that’s an idea the Bay State could look into.

“There’s a lot of money being thrown around in terms of bailouts,” says Lawrence Glazer, president of the year-old Massachusetts Jump$tart chapter. “It would take a very small percentage of that to have a significant impact on the education world.”

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Gabrielle Gurley

Senior Associate Editor, CommonWealth

About Gabrielle Gurley

Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

About Gabrielle Gurley

Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

Washington hasn’t turned on that spigot just yet. Even the President’s Advisory Council on Financial Literacy recently drafted a document recommending a national K-12 finance education mandate without including any specifics on how to pay for it.

The payback, however, is priceless. One of Gayle Whitefield’s former students, a young man working with his father in the troubled construction sector recently came back to visit with a message: Continue teaching financial literacy. “I really keep track of everything that I spend,” he told her. “And I’m saving more.”