Why Do Students Need Financial Literacy?

Have you ever learned something new about money (maybe the hard way) and thought, I wish I’d learned this in high school? Sure! We all have. That’s why we’re on a mission to make sure every student in America learns financial literacy before they graduate high school—so today’s graduates have the personal finance skills they need to avoid the money mistakes we made.

What Is Financial Literacy?

Financial literacy is just a fancy term for money knowledge.

Financial literacy classes teach students the basics of money management: budgeting, saving, avoiding debt, investing, giving and more. That knowledge lays a foundation for students to build strong money habits early on and avoid many of the mistakes that lead to lifelong money struggles.

Why Financial Literacy Courses Matter

As a country, we’ve seen what happens when students don’t have access to financial literacy. Millions of Americans struggle every day with their money. According to The State of Personal Finance in America report from Ramsey Solutions, we’re seeing stats like this:

• 54% of Americans are afraid of not having enough money.
• 34% of Americans said they’re either struggling or in crisis with their finances.
• 51% of Americans regret taking out student loans to pay for their education.

Beyond that, many Americans are finding they can’t buy homes, invest for retirement, or save for their kids’ college funds because of their own student loan debt, massive car payments, and lack of financial planning. To put it simply, they’re short on hope.

So it’s no surprise that leaders in business, education and government want to help spread the benefits of financial literacy. In 2004, the U.S. Senate passed a resolution officially recognizing April as Financial Literacy Month to “raise public awareness about the importance of financial education in the United States and the serious consequences that may be associated with a lack of understanding about personal finances.”⁽¹⁾

Bottom line: A lot of the money problems Americans are facing could’ve been avoided if financial literacy were taught in school. That’s why we believe in financial literacy for students.

How Financial Literacy Courses Help Students Succeed

So, what are the advantages of learning money principles as a student rather than as an adult? Well, students who take a financial literacy course early have the most time to apply what they’ve learned. And many financial literacy students apply those skills right away—while they’re still in high school.

For example, according to a Ramsey Solutions survey of 76,000 students, nearly two out of three high school students who had taken a personal finance course reported that they were already earning an average of $3,000 a year.

A high majority of the same group said they were in the habit of creating monthly budgets for their money. And 20% already owned a car they paid for themselves!

In fact, we found that most students who had taken a course in personal finance understood key financial topics such as:

• The difference between credit cards and debit cards (86%)
• How to pay income taxes (87%)
• How home, auto and life insurance work (90%)
• How student loans work (94%)
• What a 401(k) is and how it works (79%)

Personal finance is a critical skill, right alongside other basics like reading and math.

“Most underrated course. Should be a core class.”— Foundations teacher at Riverwalk Academy in South Carolina

What Is Taught in a Financial Literacy Curriculum?

We want the next generation to handle money wisely and beat the debt statistics! But practically speaking, how do we make that happen?

Are you a teacher? Help your students win with money today!

Thankfully, personal finance is 80% behavior and only 20% head knowledge. So while it’s important for a financial literacy course to teach money lessons, it’s more important to give students an actionable plan to manage their personal finances. Foundations of Personal Finance does just that: It offers a simple plan designed to help students confidently handle their finances. That plan is called The Five Foundations. Here’s how it works:

The First Foundation: Save a $500 emergency fund.

The first thing students should do is set aside money for emergencies. Financial emergencies like a lost cell phone or a flat tire could put students into debt if they don’t have any money set aside. But big problems become minor inconveniences when they have an emergency fund in place.

The Second Foundation: Get out and stay out of debt.

Debt is dumb! It’s a huge financial burden that way too many people carry. Cash-back rewards, airline points, minimum monthly payments and zero down—they’re empty promises. Our financial literacy class teaches students the ways debt traps them and how to break free ASAP.

The Third Foundation: Pay cash for your car.

New cars are only worth 40% of their purchase price after just five years.² Making monthly payments—plus interest—on something that’s losing value isn’t a good investment. A student’s best bet is to buy a good used car and pay cash. Yup, it’s possible! It takes planning ahead and saving up over time, but it’s way better than throwing an average of $738 a month at the “new” car they bought a year ago.³ It probably doesn’t smell so new anymore!

The Fourth Foundation: Pay cash for college.

The student loan crisis in America is out of control. Our nation’s outstanding student loan debt is at $1.56 trillion.⁴ Trillion! Today’s grads are delaying marriage and not saving for retirement. Plus, they can’t even move out of their parents’ homes because of the chains of their past—debt.⁵ Students who pay for college with cash (and without a loan), on the other hand, step freely into the next chapter of life.

Need some tips on how to save cash for college? Learn the 10 best ways.

The Fifth Foundation: Build wealth and give.

Now for the super fun part! Students who live debt-free and are disciplined about saving money can really live and give like no one else. This takes time, patience and a little bit of compound growth. But imagine the life-change that happens when money is no longer a worry. Instead of being consumed by financial stress and fear, they can enjoy their money and spend their time thinking of ways to give to others.

“Just the overall concept of giving thought to your finances is more than most teenagers do today. To give them a framework that is virtually foolproof is now presenting them with the choice to simply move forward and be successful. I, at 72, join the crowd that say, ‘I wish I knew this when I was a teenager’!” — Foundations teacher at Treasure Coast Boys Academy in Florida

_{Are you a teacher? Help your students win with money today!}

The Benefits of Financially Literate Students

When a student is financially literate, they don’t just make smart decisions with their money. They build good habits that trickle down to their families, their communities and eventually the nation. And it happens one student at a time.

Think about the jump start students could get on life if they were already budgeting, saving regularly and spending wisely—before they graduate! They could have thousands of dollars in the bank, a paid-for car, and the beginnings of a retirement fund.

And that’s not just a dream! Every year, thousands of students learn financial literacy skills through our Foundations in Personal Finance curriculum. They discover the tools they need to build a lifetime of success with money. Foundations simplifies big topics like insurance, taxes, real estate and the global economy so students can feel confident stepping into the next chapter of their lives.