Should we be teaching financial literacy in schools?

This post first appeared on The World Bank’s Eurasian Perspectives Blog.

The 2008 financial crisis was a “wake up” call to many teachers in the United States and Canada. As families lost their homes and parents lost jobs, they began to appreciate the importance of kids leaving school with some knowledge of the world of finance – especially about how personal decisions are made about finance and how financial decisions taken by government directly affect their lives and future prospects.

A study group from Moscow and five regions of Russia recently visited Canada and the US to learn more about initiatives in those two countries and to bring discussion about financial issues into the classroom – with the idea of turning today’s students into active and responsible citizens of the future, able to make well-informed personal financial decisions and to engage in discussions about public finances on behalf of themselves and their communities.

Canada’s “Student Budget” program is an inspiring example of how to get students engaged and motivated. Each year, students get to debate real budget issues, in real time, and to hear from the real decision makers about the hard choices that have to be made. Students get to look at the facts, hear opinions from politicians, business leaders and other interest groups, debate budget priorities with fellow students, and then express their own views using a survey tool.

The results are then collected from schools across the country and consolidated to create the Student Budget, which expresses the collective views of students on spending priorities. A small group of students then gets to present the Student Budget on behalf of all the participating schools to the Minister of Finance in Ottawa and to have a more in-depth discussion with the Minister’s advisers.

Students told the group that being part of Student Budget was their first exposure to the topic of budget. Having political leaders, who they were vaguely aware of from watching TV, speak directly to them in their classrooms (via video recordings), and having the opportunity to deal with real life issues, had quite an impact on their thinking, sparking their interest in finance and public affairs and, in some cases, changing the direction of their future studies and career choices.

Interestingly, the study group heard that teachers very often don’t know much more than their students about the topic, so significant investment was needed to improve teachers’ own understanding of economics and finance. Despite a certain fear factor, however, there was no shortage of teachers willing to get involved and consequently the program has expanded rapidly, with support from provincial governments and non-profit organizations dedicated to civic education and economic education such as CIVIX Canada and the Canadian Council for Economic Education.

In the US, it’s a similar story. Here, inspired by the financial crisis, Columbia University, supported by the Petersen Foundation, took the initiative to develop a set of lesson plans for teachers. These materials were designed to be used by teachers in history, economics, mathematics and social studies classes.  Starting in 2009, these lesson plans have now been introduced into schools in 50 states. Teacher’s College and the Council for Economic Education have supported this with delivery of materials and training organized through a network of non-profit and academic institutions.

In Boston, an initiative by the City Council called “Youth Lead the Change: Participatory Budgeting” empowers young people to participate in the budget process – by allowing them to decide how $1,000,000 of the city’s budget should be spent. First, a group of 30 youth organizations created a rulebook, then assemblies were held across Boston to generate ideas and a core group of young people turned those ideas into specific proposals. Finally, a vote was held to determine which proposals would be funded.

In both countries, the study group heard some common lessons of experience. First, how helpful it was to involve teachers in the design, testing and evaluation of course materials. Second, how important it is to tie these lessons into the regular student curriculum. Teachers have to prioritize around their students’ need to pass exams, so what’s tested gets taught.

In the US, for example, the national standards for economic education (promoted by the CFEE) have built in elements of budget and financial literacy with benchmarks for testing at different grade levels.

Finally, the design of the course needs careful thought about how to engage students’ interest.  Introducing the topic of the public budget was easier once students had thought about their personal or family finances – or had had an opportunity to be involved in an initiative like the one in Boston.

Real life scenarios, involving real people and events were much more engaging than dreamt-up case studies. And, interactive learning through debate, role plays, and use of technology draws students in.   All of this provided much food for thought as Russia pursues its own initiative to promote Budget Literacy in schools.

Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Ivor Beazley is a lead public sector specialist at the World Bank.

Image: Students attend a class. REUTERS/Aly Song.