Monday, October 15, 2012

High School Classes in Economics or Personal Finance

The Council of Economic Education focuses on K-12 economic education. I just ran across their biennial Survey of the States: Economics and Personal Finance Education in our Nation's Schools, which was actually released last spring. I'll offer here an overview of the requirements for such courses across states, and then a few thoughts about the useful focus of such courses. After all, for many students who won't taken an economics course in college or won't attend college, a high school course in these topics may be all the background they have before they start taking out credit cards, leasing a new car, or finding a mortgage broker willing to set them up with a zero-down-payment balloon-mortgage home loan.

As the map shows, pretty much all states have economics somewhere in their state standards. However, only 40 states require that this standard actually be implemented by school districts (!); 26 states require that schools offer a course that is specifically economics; 22 states of those states require that students take such a course; and 16 of those states have some required testing for economics students.

Personal finance courses are less widespread: that is, 46 states have some personal finance in their state standards: 36 states require school districts to implement that standard (!, again); 14 states require that a high school course be offered in the subject; 13 of those states require that students take such a course; and five of those states have required testing on personal finance topics.

My eldest son is in high school, and my daughter will soon be in high school, so I'm highly sensitive to the fact that a high school day has only so many class hours. It's not a useful suggestion to tell schools that they need to keep adding additional classes.  In particular, my guess is that if students are to take separate courses in both economics and in personal finance, then there will be real trade-offs elsewhere in the curriculum.

But when I think about high school students from say, the 60th percentile and down--many of whom will either not attend college or, if they do, not complete a four-year degree--it seems to me that it should be possible for a single course to provide a solid background in topics like household budgeting, credit cards, insurance, personal saving, personal taxes, and car loans, home loans, and student loans. In addition, it seems to me that, with some thought, such material could be intertwined with a very basic course in economic principles. For example, discussions of household budgeting could move to an explanation of demand curves, and how quantity demanded adjusts to changes in price. Discussions of personal taxes could be a basis for talking about one way in which the federal government raises funds. Discussions of credit cards can open up topics like when consumers are protected by the presence of competition, and when there is an argument for regulation. Discussions of car loans and home loans can be used as a basis for talking about what the Federal Reserve is seeking to do when it raises or lowers interest rates.

 But my vision of this hybrid economics/personal finance course faces a number of obstacles. Some high school economics courses are prepping for the AP exam; others are a stripped-down version of the AP economics course for those not planning to take the exam. In my (limited) experience, too many high school economics courses are a stripped-down and abbreviated version of what at many colleges and universities is a full-year sequence in microeconomics and macroeconomics. In my vision, the economics portion of the course would need to be stripped down much more, to make room for the personal finance component. This kind of course would also require a certain amount of teacher training, mainly so that social studies teachers who are often primarily focused on teaching history and government can teach such courses effective.

Finally, my sense is that many high school curriculum standard face a serious problem of mission creep: that is, they start off thinking about what the median student should be required to learn--which is already too high a standard, because 50% of all students are inevitably below the median. Then those writing the standards start adding bits and pieces, all of which seem like good ideas, but the result is a set of "requirements" aimed at the top slice of the high school class. Then high school teachers in the trenches need to figure out how to cover these expanded and inflated requirements in a classroom where the students cover the whole vast range of abilities and backgrounds.

Of course, there are other models, like working some personal finance topics into the math classes that students take, or into the home economics course.My children seem to go through the same set of warnings about alcohol, smoking, and drug use every year. Before they take up smoking and drinking out of sheer boredom, I wouldn't mind seeing some of that time devoted to risky financial behavior.

But one way or another, financial literacy matters a lot. Many young people are starting off their adult lives by maxing out their credit cards, taking out car loans and student loans that they can't afford, and then facing years of dealing with ill-informed choices made when they were in their late teens and early 20s. In a short essay accompanying the CEE report, Annamaria Lusardi points out that there is a developing sense in education systems across the world that financial literacy is an important part of a high school education. Lusardi writes: ; "Given the importance of financial literacy, it is perhaps not surprising that, in 2012, the OECD Program for International Student Assessment (PISA) will dedicate an entire module to financial literacy, in addition to the topics they normally cover." It's time to find a niche for both financial and economic literacy--maybe in the same course?--in the high school curriculum.