We should prioritize financial literacy at a younger age

Timing is key to building wealth and breaking generational cycles of poverty

SOCIAL MEDIA INFLUENCERS and pop stars are constantly bombarding our youth with images of sleek cars, pricey fashion, extravagant vacations, and largely unattainable lifestyles. They sell the idea that success is defined by material possessions and how much one can acquire. What celebrities don’t often share is the focus and diligence proper financial planning requires.

Yet, that is what is vital. Empowering young people with personal financial guidance can change the trajectory of their lives for the better and set the groundwork for a successful and strong future. Managing money, creating a budget, opening a savings account, and avoiding debt accumulation are fundamental financial skills that should be learned at a young age.

This year, John Hancock’s 14th annual MLK Scholars Program is again providing summer jobs and career readiness opportunities to more than 600 Boston teenagers from a cross section of backgrounds. We want to help young people imagine what their financial futures could be, what it takes to get there, and how to use their money the best way possible – even as some participants are faced with supporting their families. Each summer, about half of all summer jobs participants contribute a portion of their wages toward one or more household bills.

Students at a personal finance session of the MLK Scholars Leadership Forum in 2019.

By working for 20-25 hours per week, the Scholars gain valuable skills and earn a salary. But the MLK Scholars Program is more than just a summer paycheck – it’s a networking opportunity and a first step toward understanding financial independence. It introduces teens to leaders in the community as well as the corporate and non-profit worlds. Every young person has a unique experience and is paired with a caring adult or peer to help them grow their confidence across a spectrum of real-world circumstances.

When it comes to financial literacy and planning, timing is everything.

It’s important that teens learn financial independence by earning their own money, but it’s just as crucial they know how to manage it and understand how to build wealth early on. Research suggests that personal financial curriculum during high school years enhances money management practices for rising college freshmen, across several critical areas of financing, from budgeting to applying for aid.

Despite the evidence, only six states mandate standalone financial literacy courses as part of their high schools’ curriculum. While many other states offer financial education, those opportunities tend to be optional or folded into courses about tangential subject matter. At the same time, inequitable access to financial services, exclusionary practices, and the historical contexts of systemic racism have created distrust in financial institutions for Black and Indigenous people of color, in particular for Black Americans.

That’s why the MLK Scholars Program has partnered with EVERFI, a leading digital education company, to give our students access to online financial literacy classes as a first step of empowering youth to begin understanding their financial goals and how to achieve them. Over the past three years, participants have revealed firsthand how the program has positively impacted their money management confidence.

The MLK Scholars, as well as all young people participating in summer jobs programs through the City of Boston and the Boston Private Industry Council, have access to the John Hancock Well-Being Education Center, which provides courses on topics from financing college and savings to identity protection and taxes.

Financial education goes hand-in-hand with our summer jobs program. Angelica, a MLK Scholar who worked at John Hancock in 2019 and returned for a second summer in 2021, said the program introduced her to the basics of personal finance, a subject she had never explored.

“The tool demystified all things money and essentially got my foot in the door of finances, something that can be, and absolutely was, really daunting,” said Angelica. “My supervisor at the time reinforced my learning through projects exploring hypothetical case studies, like interest on a loan, or even appreciation/depreciation. I didn’t understand at the time how precious that knowledge would be for the future, but it really was – I would only come to understand money more and more.”

The data is clear that financial education is a key to success.

During July and August 2020, John Hancock and EVERFI conducted a research study and asked summer youth employment program participants about their financial preparedness, the value of employment and financial education, and their plans for the future, including education and financial goals.

The findings, based on surveys from 85 participants, reinforce the importance of combining financial education and employment, which provides the means to practice making financial decisions. Sixty-nine percent of respondents agreed that receiving a regular paycheck has changed how they think about money. Seventy-seven percent of participants agreed that they felt more prepared to manage their money now than they did before the program. Eight in 10 agreed that the education they received through the John Hancock Well-Being Education Center helped them manage the money they earned.

Participants also reported being more confident than their peer high school juniors and seniors across Massachusetts. The peer group, surveyed prior to taking an EVERFI financial education course, reported lower levels of preparedness across the board, but particularly in understanding and maintaining credit, where summer youth employment program participants were almost twice as likely to report confidence in their ability.

Seven in 10 participants said they already are – or are planning – in the next year to contribute to a college savings account.

The most cited financial goal among participants was to avoid taking on new debt, with 68 percent of respondents listing this among their financial goals, compared to 58 percent in 2019. Fifty-four percent said they plan to invest and increase their wealth.

It’s a great goal. Providing young people access to knowledge that reduces the complexities of personal finance, and encouragement to take their first actionable steps to building wealth is the surest way to break the generational cycle of poverty. We need to have honest conversations about financial responsibility with young people, just as we do with other aspects of personal growth and academics.

We encourage businesses, employers, and schools to provide financial education and accessible products to the next generation entering the workforce so young people know how to make sound financial decisions over their lifetimes.

It’s essential they learn that a summer job is just the start and learning how to build a stable financial life is critical to their growth and success.

Annie Duong-Turner is the director of community investment – US lead at John Hancock. Carrie Carlisle is senior director of enterprise partnerships at EVERFI.