Stock Photo Much of the American educational system is about improving outcomes, often by focusing on results from some form of standardized test.  If students are found to be underperforming on some measure, school improvement plans, smaller class sizes, financial funding, and all manner of sundry interventions are thrown at the problem in order to correct it.  But what if you were told that there was a test that the average high school student was regularly failing?  What if this test was absolutely critical to a student’s future success?  What if I told you that the test they were failing was financial literacy?

According to a financial survey conducted by the Jump$tart Coalition for Personal Financial Literacy, one that was recently featured in a USA Today article, high school seniors scored an average of 52.4% questions correctly.  Is there a school in the entire country for which this is not a failing outcome?  This average would not be tolerated if it were in Algebra II, but we somehow tolerate it for financial literacy despite the fact that Jump$tart has repeatedly demonstrated the shortcoming.

Why is such a miserable outcome tolerated?  In short, it’s because us adults aren’t much better.  The FINRA Investor Education Foundation, an educational offshoot of the Financial Industry Regulatory Authority, Inc., the leading non-governmental regulator for all securities firms doing business in the United States, conducted a National Financial Capability Study in 2009.  One of the most startling findings from the survey were that nearly half of the respondents expressed difficulties in making their monthly expenses or in paying their bills.  Perhaps even more disturbing is that many Americans “engaged in financial behaviors that generated expenses and fees and exhibited a marked inability to do basic interest calculations and other math-oriented tasks.”  It’s no wonder our students can’t make sound decisions if we can’t even do basic math.

Who is to help with such a dire situation?  You needn’t worry: the federal government is here to help.  A financial overhaul bill passed last year created a new Office of Financial Literacy in the Consumer Financial Protection Bureau.  (You can listen to a discussion about this new office on Marketplace Money.)  The irony of a government helping with finances that is currently arguing about raising its own debt ceiling isn’t lost.  Moreover, as staff writer Karen Blumenthal has pointed out in a recent Wall Street Journal article titled “Is There a Cure for Financial Illiteracy?”, such government efforts tend to focus on providing more information, as though the simple act of providing it will cause people to make smarter financial decisions.

Some states have also stepped into the mix as well.  Massachusetts recently signed a bill into law that creates a new trust fund to promote financial literacy to students, schools, and community groups.  Tennessee is working on legislation that will connect certain financial literacy concepts to the standardized testing for social studies, which would obviously represent a significant step in establishing financial literacy as a desired outcome of a high school education.  Ohio has taken a different track by requiring schools to teach financial literacy as part of the Ohio Core, making it a graduation requirement, though the mandate has met with apathy on the part of many Ohio schools.

While such efforts will, no doubt, place increased emphasis on financial literacy, there are two important facts you should know to develop a smarter financial literacy program for your school, both of which are highlighted in an excellent article in The Economist titled “Getting it Right on the Money.”  First, the only demonstrably efficacious financial literacy programs at the high school level are those that leverage a stock market game.  If you read our blog posting earlier this year titled “Escape to . . . Reality?” – about the use of games in education – this should come as no surprise.  A stock market game has its own built-in rewards which “automatically” serve as reinforcement of the concepts being taught.  High schools would therefore be well-advised to develop literacy programs that work in such a way as link rewards with desired behaviors.  At earlier grades, creating the right habits early enough in life causes them to persist.  Jeroo Billimoria, creator of Aflatoun, a financial literacy course, has focused her efforts on six- to fourteen-year-olds, with surprising success.

Moving our students from failure to success won’t be easy, but to fail to equip them with at least a rudimentary level of financial literacy is doing them a huge disservice.  We need educators who are willing to move beyond their own discomfort with money; who will study to learn what they lack in their own financial literacy; and who will be unafraid to discuss this most taboo of topics – money – openly with their students.  The University of Minnesota Extension has put together some great free resources to get you started.  Are you going to make the commitment now to stop failing your students?