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The perceived benefits of financial education are so great that in a 2022 survey by the National Endowment for Financial Education, more than 85% of Americans surveyed said learn about personal finance should be a requirement for graduating from high school.
Lawmakers have responded to that need with the unanimous passage this week of a bill in the California Legislature that would guarantee rising generations one semester of self-paced personal finance education. Gov. Gavin Newsom signed Assembly Bill 2927 on Saturday, giving future high school seniors in California a huge head start in understanding and managing their own personal finances.
As a supporter of this legislation and a co-founder of Next Gen Personal Finance, I am pleased that Newsom's move will require a whopping 64% of all high school seniors in the U.S. to take a semester-long course in personal finance as a requirement for graduation.
California becomes the 26th state to require a standalone personal finance class. Just five years ago, only five states did so, 17% coverage of high school students, according to the Next Gen Personal Finance 2019 State of Financial Education report.
The large-scale implementation of this policy across the country is a testament to the impact and equity that comes with teaching practical skills that prepare every student for life after graduation, whether that be college or a career.
So many adults I've met over the years share with me this common personal finance statement: “This is a class I wish I had taken.” They've told me how they struggled with credit management and the damaging effects it had on their credit scores, or how their lack of investing knowledge kept them from getting in early and taking advantage of compound interest.
There is also an economic benefit for the student.
California students who take a semester course According to research from Next Gen Personal Finance and consulting firm Tyton Partners, people who invest in their personal finances can experience a positive lifetime benefit of $127,000.
The benefits don’t stop with the student. As a volunteer teacher at Eastside College Preparatory School in East Palo Alto, California, I saw this impact extend beyond the classroom as students took the lessons home to siblings and parents. This experience inspired me to co-found Next Gen Personal Finance.
It is high time that the nation's most populous state, one of its most diverse, home to innovation and opportunity, joins other states in requiring a personal finance course as a requirement for earning a high school diploma. The poor performance in this field received an “F” for financial literacy from the state in a 2023 report from Champlain College's Center for Financial Literacy. Not exactly something to hang on the refrigerator.
Currently in California, a personal finance course as a requirement for graduation is required from only 1% of high school students, according to the Next Gen Personal Finance 2024 State of Financial Education report. Compare that to 53% nationwide. By adopting this requirement, California puts a welcome end to that failure.
Every student in the state, regardless of where they go to school or their economic status, now has an equal opportunity to learn such essential 21st century skills, including budgeting, managing credit and understanding financial options for careers or college.
For those states that haven’t yet committed to universal personal finance education in high school, they simply need to recognize how these skills empower students. I’ve heard hundreds of students testify in state capitols across the country, and they often describe how the critical thinking skills they’ve learned protect them from the questionable advice floating around on social media.
This is important for our future and the future of the next generation. As Newsom said in announcing his commitment to sign the measure into law, “We must help Californians prepare for their financial future as early as possible. Saving for the future, investing and spending wisely are lifelong skills that young adults should learn before they start their careers, not after.”
He is right, and the children of California will be fine, because now managing their finances will be part of their toolkit. After all, the future success and stability of our countless generations is at the heart of the matter.
— Tim Ranzetta is co-founder of Next Gen Personal Finance and a member of the CNBC Global Financial Wellness Advisory Board.
