As more Americans struggle with record debt, personal finance education has pivoted from a grassroots effort to one involving lawmakers.

To date, 35 U.S. states have enacted laws to make personal finance classes mandatory for students to graduate high school, according to a biennial survey by the Council for Economic Education (CEE).

Among them, 12 states have crafted policy in the last two years, before which fewer than half of states felt the need to do so. Over a dozen states (15) meet the CEE’s “gold standard” by requiring money classes to extend for an entire semester.

As a result of the legislative shift, over 10 million additional students will gain “guaranteed access” to financial knowledge who otherwise would’ve been ignored, the survey shows.

Former U.S. Treasury Secretary Robert Rubin in the Survey of States, as it’s called, shared that economics represents choices, costs and opportunities.

“Teaching our students the basics of economics and personal finance helps them make more thoughtful choices," he said. The more individuals who make better choices, the greater the probability that we will have a resilient economy and a more effective political system.

States have come face to face with financial illiteracy in the wake of the pandemic, as a perfect storm of inflation, student loan debt, and income inequality became too big to ignore, experts say. So far, they have flunked on equipping students for the real world.

economic education

As the pendulum begins to swing in the opposite direction, states still have ways to go for a passing grade.

Americans "learn from their mistakes"

The Center for Financial Literacy at Vermont’s Champlain College published a report card on the state of financial literacy in America, giving only seven states an “A” grade—thanks to the curriculum requiring full-semester financial courses for students.

These winning states include Alabama, Iowa, Mississippi, Missouri, Tennessee, Utah, and Virginia.

However, nearly half a dozen states flunked entirely due to a lack of money classes.

Things are looking up, as the organization forecasts that 23 states are on track to score an “A” grade by 2028 as more of them adopt financial literacy in their high school curriculum.

The shift couldn’t come soon enough, as the price for financial illiteracy around activities like budgeting, saving, debt management, and investing is high.

More than one-third (38%) of Americans revealed in a National Financial Educators Council study that financial mistakes cost them $500 or more in 2022, 15% of whom suffered a steeper loss in the ballpark of $10,000.

Denis Poljak, a partner with the Poljak Group Wealth Management at Steward Partners, is cited by CNBC as stating: “A lot of people come out of [school] without having been taught financial literacy in any detail. They end up just […] learning from their mistakes.”

The numbers back it up, as evidenced by only a 50% success rate among American adults fielding basic money questions posed in the TIAA Institute-GFLEC Personal Finance Index, which measures financial literacy. Nearly one-quarter of participants flopped on money-related questions, the highest cohort in the poll’s history.

A lack of personal finance tools seeps into other areas of a person’s life, including knowing how to save for a rainy day fund or retirement as well as how to differentiate between good and bad debt, the latter of which can lead to exorbitant interest.

Experts suggest that to stick, financial literacy must start early in the teen years, before high school. With proper education, Americans have a greater chance of attaining financial success.

The proof is in the pudding: In the three years following the implementation of financial education in Georgia, Texas and Idaho, these states experienced dramatic drops in delinquency rates while credit scores increased, according to a Financial Industry Regulatory Authority’s Investor Education Foundation report.

Survey says more work to be done

While the CEE survey shows vast improvement over 2022, it’s also a sign of how much work has yet to be done on educating America’s youth on money habits. Passing laws is one thing, but implementing the policy is something else altogether.

“We have seen state departments of education fall short in following the intent of the law in regulations or enforcement, leaving some students without the access to knowledge that was intended by their legislatures,” the report states.

The issue appears to be in the interpretation of the legislation, where educators in states like Michigan have made a bare minimum response to the policy.

Meanwhile, a few states are following a no-holds-barred approach, expanding high school curriculum requirements beyond personal finance to also include economics.

Championing this model are states like North Carolina and Virginia, where students are required to complete year-long courses on both personal finance and economics to graduate high school.

The latest states to jump on the financial curriculum bandwagon include Connecticut, Indiana, Louisiana, Minnesota, Montana, Oregon, Pennsylvania, West Virginia, Wisconsin, Florida, Michigan, and South Carolina.

Although it remains to be seen whether financial literacy programs will move the needle on personal finances, it’s clear Americans need to grasp the basics from an early age.

As Creditnews reported, nearly one in two American adults don’t have an emergency fund, and far more spend above their means.

According to a 2023 NerdWallet survey, 83% of Americans overspend. And 84% of those who have a budget say they exceeded it on a monthly basis.

Financial illiteracy is also reflected in consumers’ over-reliance on credit cards and ‘buy now, pay later’ financing. By the end of 2023, Americans collectively owed $1.13 trillion in credit card debt—the highest on record.

Meanwhile, one in 10 credit card accounts is in “persistent debt.” These accounts barely scrape the principal balance each month, with payments mainly going toward interest and fees.