Why Teen Financial Illiteracy Is Quietly Costing Us Billions | Image Source: www.cnbc.com
LOS ANGELES, California, April 8, 2025 - As a month of financial literacy, a worrying paradox continues to support the younger generations of the United States. As financial contagion develops and the markets for economic volatility, a growing wave of young investors plunge into the financial world often armed with nothing but instinct and social networks. At the same time, a growing consensus among educators, economists and policymakers points to a simple but powerful antidote: compulsory education of financial literacy in secondary schools. However, the United States remains deeply fragmented on this front, with only 10 states currently demanding it, despite the overwhelming demand from students themselves.
According to a national survey conducted by Learn4Life, more than 85 per cent of recent high school graduates regretted that their schools no longer offered financial education in the real world. Issues such as budgeting, credit management, investment and housing ownership remain a mysterious territory that, if not exploited, could lead to years or even decades of poor financial decisions. The disconnect between what students want and what the program offers has become too big to ignore.
“Teaching students in financial markets is the greatest asset for building wealth,” said Yanely Espinal, the director of educational awareness at Next Gen Personal Finance, a non-profit organization dedicated to financial education. Espinal, along with other educators and advocates, has spent years promoting comprehensive personal finance courses in school districts in the United States. This defence is not only a good activism, it is based on convincing economic evidence.
What is the economic impact of financial literacy?
According to a 2024 report by the consulting firm Teton Partners in collaboration with Next Gen Personal Finance, taking only half of a financial literacy course offers an estimated economic benefit of $100,000 per student. This figure is probably conservative. As more young adults begin to invest earlier in life, stimulated by the increase in applications such as Robinhood and the community that invests trends in TikTok, understanding how to avoid financial problems not only becomes beneficial, but essential.
“We said it was $100,000, but when we start to see more young people invest, that number will only increase,” said Tim Ranzetta, co-founder and CEO of Next Gen. The value often comes from avoiding revolving credit card balances, understanding the real cost of debt, and ensuring better rates for auto, mortgage and insurance loans. It’s not about knowing Wall Street’s jargon – it’s about knowing how money really works in the everyday world.
These ideas are taken up in class by educators such as Roy Baker Jr., accredited public accountant and assistant professor at Stark State College. Baker also teaches financial literacy to high school students as part of the Upward Bound Summer Program. “I was raised in a financially illiterate family,” he shared, “and all my professional life before education was devoted to people with financial difficulties.”
Why is an independent financial literacy class more effective?
In a national study conducted with Dr. Jack Dorminey of the University of West Virginia, Baker evaluated the effectiveness of several financial literacy programs. His research has revealed that only independent classes of financial literacy – those that are not integrated into broader issues such as the economy – have had a statistically significant impact on reducing credit card offences, pre-determined automatic loans and mortgage loans. According to her findings, it is the undiluted approach that makes the difference.
“Ohio made the right decision to order independent courts,” Baker said. But this also raises concerns about how these courses are organized
The time has come for urgent attention. Some schools introduce financial literacy in Grade 9, but educators say that many newcomers lack experience in understanding complex financial concepts. Teaching financial literacy later – ideally in Grade 11 or 12 – can produce better retention and application, especially when students start making financial decisions in the real world such as buying cars or applying for student loans.
Do all teachers feel equipped to teach personal finance?
Another layer of complexity lies in the quality and consistency of teaching. From the school year 2024-2025, Ohio will require teachers to train financial knowledge to obtain a specific licence validation. However, those already licensed in subjects such as business, mathematics or social studies for classes 9 to 12 are exempt. This exemption increases the eyebrows, some critics wonder whether the general training on these issues really allows educators to teach nuanced financial issues such as composite interests, investment strategy or predatory loans.
Ohio gives $500 for the trainer, Baker said. “It’s a start, but we need continuous and robust professional development. Not once in class.”
Well-funded teacher training is increasingly seen as the backbone of success in financial education. Without this, even the best program will fall flat, leaving students as ill informed as before.
Why are there no more financially literate Americans?
“This really comes back to education,” Baker said, reflecting on his personal journey from financial difficulties to financial fluidity. “If he is not taught at home, he must be taught somewhere.” And that’s the problem. For millions of students across the country, financial education is not at home or in schools, making them dangerously vulnerable to adulthood.
According to the Federal Reserve, more than six million adults in the United States are bankrupt, with 23% from low-income, less educated or minority households. Without access or understanding of traditional banking services, many use costly alternatives such as control services or prepaid debit cards. These services are accompanied by high loads that can attract people into cycles of poverty, making it even more difficult to escape.
What practical skills can students acquire financial literacy courses?
It is not just about understanding how credit works or what an action is. It is about making informed decisions in everyday life. “The test is the first thing I teach,” Baker said. “Because that’s where it all starts.” Knowing what you earn, what you owe and when you owe accounts creates a basis for responsible financial behaviour.
Students also learn how to:
- Compare insurance policies
- Understand credit scores and how to build them
- Research auto loans and interest rates
- Differentiate between saving and investing
- Create realistic monthly budgets
They are not abstract skills, they are life lines. A financially literate student knows how to avoid payment day loans, how to build an emergency fund, and why composite interest counts. They understand the difference between a need and a need, which is essential to learning how to prioritize spending.
What do students and schools say today?
Roxeanna, a student at Learn4Life, simply said, “Now I understand why it’s important to know finance for your adult life. Your school has been offering financial literacy courses for more than a decade, and this year will be part of the core curriculum. According to Learn4Life Superintendent Shellie Hanes, the course is not only for children who already have money or come from stable financial funds. It is essential for all, especially non-banks and sub-banks.
“We infused courses with real situations and tried to involve them in fictitious budgetary events,” Hanes said. “Help students see how far a check goes.”
In a simulation, students had to budget the value of a month of expenses, including rent, food, insurance and recreation. The exercise was not only educational, it was open. Most students found that they had underestimated the cost of living, encouraging them to think more seriously about future employment options, savings habits and spending behaviours.
But as schools like Learn4Life increase, too many others are late. Across the country, only 10 States currently require an independent financial education course to graduate. Fifteen others committed to fulfilling the mandates by 2030. This leaves millions of students in educational limbos during one of the most economically vulnerable periods of their lives.
Financial literacy is not just a course, it’s a guarantee. And in a world where students face rising inflation, job insecurity and digital scams, it may be the only most practical subject they will learn.
Bets are too high for delay. As financial pressures increase and students enter adulthood, the demand for financial knowledge is no longer voluntary, it is urgent.
