As someone that deals with the aftermath of the financial mess my answer will surprise you. Yes there should be classes but it is NOT a vaccination against financial problems but it might be part of a longer term multifaceted solution.
My observation is that teaching these issues in high school is a bit like requiring all students to take the classroom training as part of a drivers education program when they are 12 but not let them get into a car for four more years. If you provide the education before there is a real world context then the ultimate effectiveness of the instruction may be lost.
There have been studies in fact that show that students that take financial education classes score worse on financial exams. One theory is that going through the class without any real world application only gives you more confidence and not necessarily more expertise.
While teaching what an ARM is would be handy it would probably be better to have classes in behavioral economics instead. An awareness of the numerical number of a grace period or cash advance rate alone does not neutralize the impact of marketing messages and unconscious needs.
Money problems are not about the money. The problem debt for many is a symptom of greater underlying issues.
As some point we need to ask ourselves why it is that we can control two cars hurtling down a road at each other with only a painted line separating us and not crash. Or why we can own really sharp kitchen knives and not stab people. Obviously we can control certain parts of our lives but what is it that prevents people from understanding that a big loan payment on my income is not affordable? Is that from a lack of a class in high school or could it be that the lure of pleasure is more attractive than the pain of not?
What fundamental skill is lacking in current education that would prevent someone from recognizing that if their promises to repay each month are near or exceed their potential income, that their might be a problem?
If you want to hear where the tragedy is in America today it is not from a lack of education, or awareness. In fact I have to congratulate the credit card companies for their detail in the terms and conditions they present. Every time I read one of this long documents it is all laid out right there and what was it that prevented the consumer for reading that document for a greater awareness? “”Can you believe I got charged a $50 late fee””, people say. “”What did it say the late fee was in the terms and conditions of the card?””, you ask. “”Who reads that stuff?””, is the typical response.
No, the tragedy in America today is that when people run into financial problems that there is no independent and impartial safety net to help them in their fall or resolve their situation.
Credit counseling groups have turned into nothing more than pay for performance compensated debt collectors, fair and reasonable rescue solutions don’t exist and bankruptcy is now a more painful solution for people in dire situations.
Before I step off my soapbox, just take a look around and see if you can find a solution in America that will allow consumers to put forward a fair, reasonable and binding debt repayment plan based on what they can afford. You can’t find that. Yet those solutions exist in others countries. Why not in America?
I tried to implement that solution to America for five years and was fought at every turn by lenders. Instead what America got at the same time was bankruptcy reform that benefited lenders.
I would argue that while consumers do deserve the best care and education possible, that as long as lenders ethics are the pursuit of shareholder performance over what is good for their customers that the consumer will be a victim regardless of how many classes they have.Is Financial Education for Students Alone An Effective Solution? by Steve Rhode