Teaching Kids to Manage Money Yields Big Returns, Research Says

Walk into Tamekia Davis’s 11th-grade classroom and you may see students’ desks covered in beans—but it’s not a cooking class. “The beans will represent your salary,” announces Davis, a teacher at Parkdale High School in Maryland, causing a few heads to turn. “And you’re going to have to decide where you are going to spend this money.”

With this unusual task in hand, students huddle together in pairs to make difficult decisions. Should they spend one bean to ride the bus or three beans to buy a used car? And what about food—cook at home for two beans or eat out for four? This bean-based crash course in budgeting not only is fun; it’s also an example of a relatively simple lesson that introduces students to key concepts in personal finance.

But how effective are finance lessons, really? When kids are introduced to complicated financial topics like compounding interest rates, savings accounts, or personal and business taxes, does the information just go in one ear and out the other?

New research from Vermont’s Champlain College is unequivocal: Financial literacy lessons have an “overwhelmingly” positive impact on students’ future financial habits, from budgeting and saving to avoiding predatory loans, according to their 2023 report on nationwide high school financial literacy. In fact, the effects on students’ financial well-being are detectable over a decade after graduation.

Research Points to Robust Benefits

In their report, Champlain College’s researchers assigned U.S. states letter grades based on their commitment to high school financial literacy. An A meant that the state required “personal finance instruction as a graduation requirement that is equal to a one-semester, half-year course” at the high school level. An F, meanwhile, indicated that the state had “virtually no requirements for personal finance education in high school.”

Only seven states received an A. A plurality received Bs, while five states—including California, home to one of every eight high school students in America—got an F.

Many states are in the process of implementing new personal finance laws, though, so the researchers project that 23 states will reach an A grade by 2028. That’s a welcome trend, the authors write—not simply because the Covid-19 pandemic has highlighted the financially precarious situations of many American families, but also because high school personal finance courses have a robust impact on students’ future financial habits.

“Overwhelmingly, high school financial education improves credit and debt behaviors,” the report says. “Requiring financial education improves credit scores, reduces delinquency rates, reduces the use of alternative financial services (e.g., payday lending), and shifts students from high-interest to low-interest methods of financing a college education.” 

A 2020 study they cite, for example, found that 18-to-21-year-olds were at least 40 percent less likely to fall a month behind on payments to credit accounts if they had three years of financial literacy education in high school; these recent high school graduates also had credit scores roughly 25 points higher than those of their peers. 

These advantages last, too: Research shows that the benefits of high school finance lessons—from increased savings to speedier loan repayments—were still detectable 12 years after graduation.

Surprisingly, the benefits can also be spread among generations. Parents of the students receiving financial instruction tend to end up with higher credit scores and a lower chance of defaulting on loans, and educators who teach financial literacy often see an increase in their own savings balances.

FINANCIAL LITERACY ACTIVITIES TO TRY

Given the widespread benefits of financial literacy, it seems worthwhile to integrate more finance-related lessons into class—even if your state doesn’t mandate it, and even if it isn’t a subject you’re responsible for. 

There are a variety of simple personal finance lessons that can slot into subject-area classes like math and English language arts. Here are a few to consider trying:

Play the bean game: To try the bean game from Davis’s class, check out this embedded worksheet—as well as the accompanying lesson plan from Next Gen Personal Finance. The worksheet lists various housing, food, insurance, clothing, and transportation options, ranging from 0 to 4 beans in price. (You can use any small object for the currency.) In her classes, Davis includes an optional element of chance: A digital wheel determines whether a random financial event will affect the whole class. If the wheel lands on “broken leg,” for instance, groups must remove three beans from their paper if they didn’t include health insurance in their original budget.

Evaluate credit cards and tax forms: At San Marcos High School in California, personal finance teacher Tara Razi “literally brought her wallet into class and showed us her different credit cards,” one of her students told KQED. Having kids compare different credit cards—their interest rates, late fees, cash-back policies, and benefits—is a fun and informative activity that could be integrated into a math lesson. For another math-related finance activity, Mission Hills High School’s Jeff Montooth has his students fill out tax forms using either fake pay stubs or real ones from their part-time jobs; kids are surprisingly engaged by filing mock taxes, often competing to get the biggest tax refund, Montooth told KQED.

Budget-based PBL: Middle school teacher Pamela Kranz designed a monthlong project-based learning (PBL) unit that she integrated into her math classes. Students choose a career from a list of options, then receive a “salary” for the month based on the actual median salary for that career, as reported by the Bureau of Labor Statistics. Over the course of the month, students must choose between apartments (from actual online listings), transportation options, groceries, and more. During each activity, they calculate their expenditures to make sure they’re staying within budget.

Play financial Jenga: Family and consumer sciences teacher Kailen Stover has students play a game of Credit Score Jenga, where each Jenga block that a student pulls out has a number corresponding to one of 50 different credit-related events. If a student pulls a seven, for example, it means they “paid [their] $350 car loan payment on time” and should add 10 points to their credit score; pulling a 33 means they were a victim of identity theft, and they must subtract 70 points.

If you’re looking for more specific finance-related curricular resources, check out free online lesson plans offered by Next Gen Personal Finance or class activities from the Consumer Financial Protection Bureau.