As Los Angeles slowly emerges from one of the most difficult economic downturns in its history and public policy is emerging to lead us forward into the next cycle business, leaders are uniformly in support of the usual business-friendly propositions: lower taxes, less regulation and red tape, a better trained workforce, improved infrastructure. These are all excellent elements of an improved economic climate debate, but what about improved financial literacy among students and young people?
Financial literacy is a critical life skill. Ask any one of the tens of millions of Angelenos impacted by the $7 trillion decline in the value of household wealth starting in 2008, which was at least in part caused and sustained by basic misunderstandings of personal finance and a lack of economic thinking, and the answer is a resounding, “Yes, financial literacy is important.”
This life skill is important at any age, but it is particularly important for young people preparing for their future. It is not a large stretch to note that a student’s credit history can be as important to his or her future as their grade point average. Yet most students fail standardized testing on the subject and most schools do not offer even a basic class on personal finance. How can we expect a different outcome when the next financial crisis arrives?
I strongly urge the business community of Los Angeles and all citizens interested in a strong economy in this great city to ask for and demand that financial literacy be required to be taught in our schools. A good place to start is to support AB 166, authored by Assembly member Roger Hernandez, which would at least incorporate some financial literacy training in the one economics class required to graduate from high school. This would be a low-cost, high-impact ingredient in preparing tomorrow’s consumer-citizen-workforce member.
Today’s students need to know more about the complex financial decisions that face them, including the decision to stay in school or drop out, the choice of college and how to pay for it, the decision to begin or defer starting a family, the balance between current spending and saving for the future. And yet students today are less prepared than any time in recent history.
Let’s start with basic knowledge of financial literacy. In 2012, virtually all studies conducted to measure levels of personal financial literacy among K-12 students reflect low levels of practical knowledge on the subject.