First published in Social Education #78(4), pp. 189–191
In "Proposed National Standards for Financial Literacy: What's In? What's Out?" Maier, Figart, and Nelson pose the question: "How should educators use the standards?" 1 In answering that question, they suggest a number of issues and topics that they believe should be taught along with the National Standards for Financial Literacy. Among the most daunting challenges faced by standards writers in any discipline is the delineation of boundaries to define the breadth and scope of the discipline. The question of "What should be in and what should be out?" in these standards loomed large throughout the nearly two years of work on them. In this article, we provide additional explanations about the rationale for these standards and the process we used to develop them. We also describe how these standards can be used by educators nationwide.
In an article published in Social Education in 2005, John Morton described personal finance as a "homeless curriculum." Morton explained that there was no "unified set of principles to inform personal finance curriculum." He further noted, "Without the focus and direction that a unified set of principles could provide, personal finance education in practice often comes to little more than pious admonitions and the pursuit of trivial facts."2 While well-designed and implemented content standards for economics have existed since 1998,3 as Bosshardt and Walstad explain, no document up to this point has defined personal finance content "as an application or extension of economic understanding and analysis as applied to individual or household decision-making."4 Taken together, these factors combined to create a call to action for the development of the National Standards for Financial Literacy.
Bosshardt and Walstad described the three guiding principles for the preparation of these standards: (1) financial education content is, as previously noted, "an application or extension of economic understanding and analysis as applied to individual or household decision-making"; (2) personal financial decision-making is fundamental to financial education; and (3) content consistency would be maintained by employing national experts in economics and personal finance to write and review the standards and benchmarks to ensure overall consensus within the discipline and applicability to schools nationwide. Furthermore, the authors sought to ensure that the standards and associated benchmarks avoided normative statements about what students "should do or how they should behave in conducting their financial affairs."5 And, as Siegfried and Meszaros explained when describing the process used for developing the first edition of the Voluntary National Content Standards in Economics, the authors of these new financial literacy standards sought to write standards and benchmarks that were parsimonious, conceptual, and reflected content essential to young people's financial success.6
In writing the Standards, the authors had to consider how personal finance content is currently taught in the United States. Only 19 states require that a high school course be offered and only 17 states require that the course be taken before graduation.7 Given these conditions, the majority of personal finance content currently taught in American classrooms is being integrated into other K-12 courses. Teachers who integrate personal finance into other subject areas have a very limited amount of time to devote to the content. Financial education leaders nationwide report classroom time as the leading obstacle to the teaching of personal finance content in the nation's schools.8 As a result, teachers have little time to engage their students in the many possible extensions and connections that could be made if they had unlimited classroom time. In those high schools where a stand-alone personal finance course is required to be or voluntarily offered, the course may be taught in any number of departments or disciplines including math, social studies, business, and family and consumer sciences. The Standards provide an easy to use and concise outline of personal finance content associated with the everyday financial decisions young people will make in adulthood.
Standard Number and Topic
|I. Earning Income||Income for most people is determined by the market value of their labor, paid as wages and salaries. People can increase their income and job opportunities by choosing to acquire more education, work experience, and job skills. The decision to undertake an activity that increases income or job opportunities is affected by the expected benefits and costs of such an activity. Income also is obtained from other sources such as interest, rents, capital gains, dividends, and profits.|
|II. Buying Goods and Services||People cannot buy or make all the goods and services they want; as a result, people choose to buy some goods and services and not buy others. People can improve their economic well-being by making informed spending decisions, which entails collecting information, planning, and budgeting.|
|III. Saving||Saving is the part of income that people choose to set aside for future uses. People save for different reasons during the course of their lives. People make different choices about how they save and how much they save. Time, interest rates, and inflation affect the value of savings.|
|IV. Using Credit||Credit allows people to purchase goods and services that they can use today and pay for those goods and services in the future with interest. People choose among different credit options that have different costs. Lenders approve or deny applications for loans based on an evaluation of the borrower's past credit history and expected ability to pay in the future. Higher-risk borrowers are charged higher interest rates; lower-risk borrowers are charged lower interest rates.|
|V. Financial Investing||Financial investment is the purchase of financial assets to increase income or wealth in the future. Investors must choose among investments that have different risks and expected rates of return. Investments with higher expected rates of return tend to have greater risk. Diversification of investment among a number of choices can lower investment risk.|
|VI. Protecting and Insuring||People make choices to protect themselves from the financial risk of lost income, assets, health, or identity. They can choose to accept risk, reduce risk, or transfer the risk to others. Insurance allows people to transfer risk by paying a fee now to avoid the possibility of a larger loss later. The price of insurance is influenced by an individual's behavior.|
|Source: Council for Economic Education (2013), Bosshardt and Walstad (2014)|
The resulting standards and accompanying benchmarks at grades 4, 8, and 12 do not assume prior financial knowledge. They establish an academic base for the discipline of personal finance — that is, a "unified set of principles" that provide focus and direction for those teaching personal finance and those seeking to advance the teaching of personal finance nationally and at the state and local level. The six standards are organized around the major financial activities of individuals and households: (1) earning income, (2) buying goods and services, (3) saving, (4) using credit, (5) financial investing, and (6) protecting and insuring. A total of 144 benchmarks were written at the 4th, 8th, and 12th grade levels to inform the specific learning objectives students should achieve by the end of each of those grades. The standards are listed in Table 1.9
The Standards were published in March 2013, and in April of that year, the Consumer Financial Protection Bureau (CFPB) released policy recommendations for advancing K-12 financial education.10 The CFPB outlined five essential strategies for advancing financial education for young Americans. The strategies include introducing personal finance content early, building the complexity and breadth of the personal finance content coverage across the kindergarten to high school grades, and capping a student's K-12 personal finance education with a high school personal finance course. The Standards provide a guide for implementation of this recommendation. This is one way that the authors of the Standards envisioned their use — to inform the national implementation of K-12 personal finance education.
In June 2014, the Florida Board of Education voted to adopt standards in financial literacy. The adopted standards, while modified to parallel the wording used in Florida's academic content standards for other subject areas, are for the most part the benchmarks from the new National Standards. This adoption is another example of how the authors of the Standards hoped the document would be used — as a guide to provide focus and direction for states and local school entities seeking to advance the teaching of personal finance in schools nationwide. The authors wanted the document to be used by state departments of education and state boards of education that delineate standards and by school administrators and teachers who are charged with implementing state and district standards and mandates in classrooms, as well as by curriculum and textbook writers.11
For classroom teachers, the Standards provide a guide for the teaching of personal finance across the K-12 grades. Teams of teachers within schools and across multiple schools in the same school district can use the standards to develop their own scope and sequence to ensure that students receive comprehensive personal financial education before they graduate. Individual teachers can use the standards and benchmarks to structure their own lesson plans. Additionally, classroom teachers can use the performance indicators that accompany each benchmark to assess student mastery of the content.
There are many connections and extensions that can be made between the new financial literacy standards and associated disciplines. Maier, Figart, and Nelson suggest topics in the financial literacy standards that overlap with discussions and debates appropriate for social studies classrooms nationwide on the role of government, the importance of the not-for-profit sector, and broad social goals. Likewise, colleagues in business education, for example, can easily see connections between the content expressed in the new financial literacy standards and their work teaching students about entrepreneurship, business law, accounting, and marketing.
And as intended, there are numerous connections between the National Standards for Financial Literacy and the Voluntary National Content Standards in Economics. The authors of the financial literacy standards recognized that personal finance content aligns closely with economic content. In fact, while meeting benchmarks in the national financial literacy standards, teachers can easily teach economic content related to numerous standards in the Voluntary National Standards in Economics, including: Standard 1—Scarcity; Standard 4—Incentives; Standard 7—Markets and Prices; Standard 8—Role of Prices; Standard 10–Institutions; Standard 11—Money and Inflation; Standard 12—Interest Rates; Standard 13—Income; and Standard 16—Unemployment and Inflation. There are many important connections between the financial literacy content and other academic content areas that teachers could make; however, given limited time, there is a significant opportunity cost to doing so.
We encourage educators across the country to augment the financial literacy standards and benchmarks as they see fit as long as the emphasis of the instruction is on content and concepts presented in these standards and benchmarks. We think that it is important that every student be taught this material. The Standards provide a concise document listing the personal finance content that we believe all U.S. students should be expected to know before graduating from high school.
We trust that talented teachers will use these content standards and benchmarks to guide their teaching of personal finance. And they will likely integrate additional content from other academic disciplines when most appropriate and as classroom time allows. We encourage government agencies and educational organizations engaged in promoting financial literacy to use these standards as a guide to encourage nationwide implementation of personal finance in the nation's schools. And we urge school boards and departments of education to adopt these standards and benchmarks as their own expectations for their teachers and schools. Finally, we call on curriculum developers and textbook publishers to align their instructional materials with these new financial literacy standards.
Andrew T. Hill, Ph.D., is the economic education advisor at the Federal Reserve Bank of Philadelphia and adjunct professor of economics at Temple University. Mary C. Suiter, Ph.D., is assistant vice president and economic education officer at the Federal Reserve Bank of St. Louis. The authors wish to thank the other members of the National Standards for Financial Literacy writing committee (William Bosshardt, Stephen Buckles, Bonnie Meszaros, Michael Staten, and William Walstad) for valuable feedback and suggestions on previous drafts of this article.
The views expressed here are those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.