Early Acceptance: Should We Mandate Financial Education?
Education and Careers High school students who complete a rigorous, carefully implemented personal finance program may see improvement in credit behavior down the road.
It’s always gratifying to learn that what is being taught in school can bear fruit in the real world. In fact, a groundbreaking study of financial education recently found this to be the case.
The study, State Financial Education Mandates: It’s All in the Implementation, was conducted by researchers at Montana State University, the Federal Reserve Board and the University of Wisconsin-Madison and funded by the FINRA Investor Education Foundation.
It found that students exposed to school-based financial education in Georgia, Idaho and Texas—all of which have rigorous financial education mandates—had better credit outcomes later in life relative to young adults in comparable states without financial education mandates.
Relative to the states without financial education mandates, credit scores improved by 11 points in Georgia, 16 points in Idaho and 32 points in Texas. In addition, 90-day delinquency rates on credit accounts decreased in all three states.
Texas, a state that not only mandates financial education but also requires students to be tested in personal finance showed a whopping 33 percent drop in severe delinquency of credit card payments.
These findings shed valuable new light on the potential benefits of providing a rigorous and well-implemented financial education program to high school students. Perhaps more importantly, this study can help guide the field in our collective quest to better understand what works in financial education—and how best to tackle the daunting task of increasing the financial capability of all Americans.