Smart Spending Stems From Schooling

By Jonathan Tomczak

If an education is supposed to prepare us for the "adult world," then it's failing in one major respect: dealing with money. Why isn't it a requirement for schools to teach students about managing their personal finances?

In the state of California, the education standards for economics can be met by only one semester of class. What's worse is that the standards deal only with macroeconomics, or how the economy works on a societal level. Nowhere is there any concern that students, upon leaving high school, understand the importance of a credit score or even how to balance a checkbook.

I'm very fortunate that my father not only understands how to manage the family's finances well, but has been willing to teach me. Many young adults are not as lucky, and must exit high school teaching themselves what is arguably the single most important skill we can have. 

In a world where credit has become king and consumerism runs rampant, the temptation to spend or borrow mindlessly can be too much for some. People who graduate high school uninformed may graduate college in so much debt that it will take until retirement to dig themselves out.

This hurts the economy as a whole just as much. The Great Recession was caused mostly by an explosion in "subprime" mortgages, or mortgages given to people who wouldn't be able to pay the banks back if they called in the loans, which of course they did. The U.S. Department of Housing and Urban Development found that subprime mortgages went from 8 percent of total mortgages in 2005 to 20 percent in 2007, the year the recession began.

Of course, part of the blame lies with the banks, who shouldn't have been giving out loans like cheap taffy. Yet, if the American people had been taught the basics of budgeting and if knowing which terms to stay away from in a loan was a bedrock of American education, then there wouldn't have been so many bad loans to begin with. The recession would likely have still happened, but there wouldn't have been anything "Great" about it.

The solution is a simple one: include state education standards that focus on personal finances. checkbook balancing. 

It's a sad state of affairs where students learn more about compound interest in a calculus class than they do in economics. It wouldn't even cost the state a lot of money to implement; only that which is needed to design the standards and add the material to state tests.

The free market depends on a consumer that spends wisely. A smart shopper is able to spend more money more often, leading to a steady growth instead of sickly cycles of boom and bust. With the fiscal health of the nation a hot topic, personal finance education is a simple solution that will benefit every American, every day.