There has been a long dispute over whether or not state-mandated financial education programs in high schools actually help improve financial literacy and overall financial health in adulthood. However, new research has emerged that provides consistent evidence that these programs are effective.
According to a report by the Consumer Financial Protection Bureau (CFPB), financial education is defined as, “A process of lifelong knowledge and skills development required to achieve financial literacy, mitigate financial risks, protect assets and ensure ongoing effective management of one’s savings, credit, debt, housing, and other resources to maximize financial well-being of individuals and society.” Recently, two new studies were released which prove that proactive financial education is key to a more financially literate America.
FINRA Investor Education Foundation Funded Study
A FINRA Investor Education Foundation funded study, State Financial Education Mandates: It’s All in the Implementation, conducted by Dr. Carly Urban of Montana State University and researchers from the Federal Reserve Board and the Center for Financial Security (CFS) at the University of Wisconsin-Madison, looked at three states: Georgia, Idaho, and Texas. These states previously had not mandated financial education in high school, but changed financial education mandates after the year 2000. CFS affiliates analyzed the credit scores of young adults starting at age 18 until they reached the age of 22 using the Equifax Risk Score that ranges from 280-850. The findings from those state mandates prove that carefully implementing a rigorous financial education program in high school can improve credit scores and lower the probability of delinquency for young adults.
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