Teaching children financial literacy can narrow the black wealth gap

(State of Financial Education: Many of the money problems Americans face could have been avoided if financial literacy had been taught earlier in school. This knowledge helps lay a foundation for students to build strong money habits early on and make many mistakes This story is part of a series that looks at the current financial education landscape in this country.)

Kinsha Sidibe is a freshman in high school and is already learning about personal finance.

It’s not because the state she lives in, Pennsylvania, requires education. It is thanks to a program run by a niche nonprofit clinic through their high school, Hardy Williams High School of the Mastery Charter School in Philadelphia.

“Before that, I really had no understanding of personal wealth,” said 14-year-old Sidibe.

“It made it clear to me what I should do to grow my wealth and manage my own finances if I don’t want to get into debt,” she said.

Research shows that having personal financial education helps avoid payday loans, achieve better credit results, and reduce personal student loan balances and credit card debt, among other things.

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Only 21 states require students to take personal finance courses to graduate from high school, with only a handful of stand-alone classes required, according to the Council on Economic Education.

However, access to this education remains unequal and the implications are clear. In 2019, the median net worth for black households in the United States was $ 24,100, compared with $ 189,100 for white households.

As for the programs, less than 12% of students need to take a standalone personal finance course to graduate from high school. Outside the six states that mandate it, a study by Next Gen Personal Finance, a nonprofit that focuses on providing financial education to middle and high school students, found.

When it comes to black and brown students, it drops to 7.4%. Of the low-income students, 7.8% must attend the class.

This means that not only is the prosperity gap increasing between 1% and 99%, but the racial prosperity gap is also increasing, warns Yanely Espinal, director of education at Next Gen.

“Funding decisions and behavior will not improve, which will lead to another generation plagued by debt,” she said.

Of course, taking a personal finance course helps balance understanding for all students.

Of course, financial literacy isn’t the only factor contributing to the racial gap, but it’s a component that is part of the solution, she noted.

According to the 2021 TIAA Institute-GFLEC Personal Finance Index, black adults are already lagging behind whites in terms of financial literacy.

Adults from the United States, on average, answered only 50% of the TIAA indexes correctly. White adults understood 55% correctly, while blacks answered 37% of the questions correctly. Hispanics also lagged behind at 41%.

Due to the lack of government-mandated personal finance courses across the country, some schools have filled the void.

In Prince George’s public schools, Maryland, it was actually the students who advocated and called for a personal finance class in the district high schools last year.

It is one of the largest school districts in the country and one of the most diverse. 55% of the students are black and another 36% are Hispanic or Latin American.

The course is now required to complete high school, starting with the 2024 class.

“We want them to know how to make money, how to make money for them, and how to stay out of debt or manage debt they may incur,” said Monica Goldson, CEO of Prince George’s Public Schools.

Among the students who stood up for the mandate and testified before the board was Zoë McCall.

High school student Zoë McCall advocated a commissioned personal finance class for all high schools in Prince George’s County, Maryland.

Photo: Drue Thornton

While having a few money talks at home, she wanted to find out more. She also saw the challenge faced by many of her coworkers who didn’t talk to their parents about money at all.

“Not all of us know how loans work. Not all of us know how to get a loan and the like,” said McCall, now a 15-year-old student at the Academy of Health Sciences in Largo, Maryland.

“We need to know how to get a loan to pay college, we need to know how to repay student debt, we need to know the basics of money and not many of us do,” McCall added.

While financial literacy is important for everyone, it is even more important for those who are economically disadvantaged and likely to know less about these issues, Goldson said.

“We hope this financial education gives students the opportunity to make their money for them and ultimately is a catalyst for upward mobility,” she said.

Due to the lack of finance classes in schools, nonprofits have long played a role in trying to bring education to underserved communities.

The graduating class of 2019 at Parkdale High School in Riverdale, Maryland. Beginning in 2023, seniors will graduate after completing a required personal finance course.

Public Schools in Prince George’s County

In the National Urban League, financial education is part of the Project Ready initiative, which supports youth outside the classroom.

“Some of these children are economically precarious,” said Cy Richardson, senior vice president of programs for the National Urban League.

Some of the barriers to requiring such public school education are inequality in school funding, as well as budgetary and governance challenges, he said. Teachers also need to have the right skills and training.

“It can’t just be prepared to differentiate between credit cards and things consumers face,” said Richardson. “It’s daily life; the small decision-making gains that relate to financial performance.”

While some may also be concerned about the cost of the curriculum, it’s free on any number of nonprofit websites, said Next Gen’s Espinal.

We hope this financial education gives students the opportunity to make their money for them and ultimately is a catalyst for upward mobility.

Monica Goldson

CEO of Prince George’s Public Schools

What remains is to find a teacher who has a passion for the material and train them, which is also possible at no cost through institutions like Next Gen, she noted. More than 6,000 teachers have completed 130,000 hours of professional development at Next Gen since the beginning of March 2020.

“Research shows that the impact of this work has resulted in a significant increase in their confidence, which we know leads to more effective teaching,” said Tim Ranzetta, co-founder of Next Gen.

Once students start learning the material, it will not only benefit them but their families as well.

“The students definitely take this home with them,” said Espinal. “You see parents asking about Roth IRA accounts and whether to open them.

“It’s having a ripple effect on the entire community, students, teachers and parents.”

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