A national standard for financial literacy

I spent a lot of time on a beach in Italy in August building sand castles with my niece Giorgia. It was not an easy operation and required a lot of time and patience, particularly in my case, given that as I finished one part of a castle and started building another, the first part would collapse. But since it takes so much time and patience to build a sand castle, I had a lot of time to reflect on things that had been on my mind.

I thought a lot about the ideal content for a course in financial literacy. I had recently finished teaching just such a course (see my previous blog post), but it was a crash course with only four 3-hour classes. While it’s possible to pack a lot into those hours, a full-length course would provide much more time. What else could be added to such a course? What are the financial literacy topics we “must” teach?

When I started designing my short course, I searched for syllabi on the web. In browsing materials, including what is covered in high school classes, I was struck by how much material is out there and how many different courses there are and the variety of topics these courses cover. I also looked at books on personal finance (and it is a jungle out there—everybody, including people who have gone bankrupt, wants to tell their story and teach you how to be financially savvy). Some of the material I found seemed very good, some covered topics I thought would better be in a history course (for example, how to balance a checkbook), and some material was offered in the way you’d teach basic cooking or household plumbing—a lot of how-to’s that are supposed to make people smart.

I was also struck by how much courses differed, even though they were all supposed to cover financial literacy. Part of this is a reflection of the fact that we do not yet have a definition of what financial literacy is. This is a topic I will come back to in future posts, but differences in curricula across schools and states reflect the lack of a national standard on financial literacy.

I am, thus, very happy to report that the Council for Economic Education (CEE) has put together a team of experts to address this gap in the national standards. As I have mentioned in previous posts, financial literacy is no different in Vermont than it is in California, and it is not clear why we have so many different curricula in different states. A group of experts coordinated by the CEE will work together to create a single National Standard for Personal Finance. I am delighted to have been asked to participate in that work and very happy that many of the stakeholders involved with financial education are part of the teams of experts—not just academics but also high school teachers, representatives of not for profit institutions working to promote financial literacy, and so on.

My contribution to this initiative is twofold. First, I want to make sure that the financial literacy topics that are covered are rigorous and that we help students be decision makers. We need to give them tools to understand a world that continues to change. And we need to stay away from teaching rules, such as “you should save 3% of your salary”; teaching rules is not teaching, it is preaching. I also want to make sure we can use and incorporate some of the work done by the group of financial literacy experts in the Programme of International Student Assessment (PISA), which had the ambitious task of measuring financial literacy of high school age students across countries. The world is global and our students have to conform to standards not just in the United States but across the world.

This is the thinking I was doing while developing my sand castle building skills. And while I was admiring my finished work one afternoon, smiling with satisfaction, Giorgia—the little rascal—looked at my many hours of work and declared that my caste looked like “un gigante zoppo.” ( For those of you who don’t speak Italian, she said my sand castle looked like “a lame giant.”)

So, here are my three reflections:

1) Having national standards for personal finance will simplify the work of educators and help ensure the teaching of common concepts so that financial literacy is covered in a similar way across states and countries.

2) A unified national standard will likely result in the teaching of more rigorous concepts than we currently see in existing courses.

3) Never put a five-year-old on a team of judges at a sand castle building contest.