No student should graduate from a New Jersey high school without learning basic personal finance concepts. Two converging factors indicate that now is the time to explore ways to teach personal finance concepts to all students. First, schools across New Jersey are striving to implement the Core Curriculum Content Standards, and, second, numerous indicators (e.g., low savings rate, high debt and bankruptcy rates) provide evidence of financial distress. The purpose of this paper is to examine sections of the New Jersey Core Curriculum Content Standards that pertain to personal finance education. It also discusses how the NEFE High School Financial Planning Program® (HSFPP), sponsored jointly by Rutgers New Jersey Agricultural Experiment Station (NJAES) Cooperative Extension and the National Endowment for Financial Education®, can be used to meet the standards. In addition, the paper examines previous studies that document the impact of financial education and the rationale behind educational standards in general.
Education throughout New Jersey and the nation is undergoing a sea change. The past two decades have seen the release of numerous reports that document the need to improve student achievement through educational reform. Examples include the U.S. Department of Labor's Secretary's Commission on Achieving Necessary Skills (SCANS) report (1991), What Work Requires of Schools: A SCANS Report for 2000, and the National Governor's Association's A Nation at Risk: The Imperative For Educational Reform (1983). The impetus for the school reform movement grew out of frustrations by business and industry with an inadequately prepared labor force that was unable to compete in a rapidly changing technologically oriented and global economy.
All of these reports describe evidences of poor student achievement and propose dramatic measures to profoundly change schools. Among the changes that have been proposed are changes in school governance and financing, restructuring of the school day, and increased accountability through the adoption of curriculum standards and standards-based assessment. The reports also describe desired competencies that students should achieve. The 1991 SCANS Report, for example, lists five necessary life skills: resource management (e.g., time, money, materials, and facilities), interpersonal relationships and teamwork, the ability to acquire and use information, an understanding of complex inter-relationships (e.g., organizational systems), and ability to work with a variety of technologies.
Standards represent expectations for student performance and define the content that students should know and be able to demonstrate. The adoption of standards helps teachers, school administrators, students, and parents focus on the achievement of a specific set of educational content. Throughout the country, standards for various subject matter areas have been developed under the direction of state education agencies. An example is the New Jersey Department of Education, which provided leadership to the development of the state's Core Curriculum Content Standards. Differences exist among states as to whether standards should be prescriptive (i.e., dictate specific content) and whether they should be voluntary or mandatory.
On the national level, standards have also been developed by professional associations to provide a consistent nationwide disciplinary framework of educational expectations. Professional organizations that have produced standards that advance personal finance literacy include the National Council on Economic Education (Voluntary National Content Standards in Economics) and the National Association of State Administrators of Family and Consumer Sciences (National Standards for Family and Consumer Sciences Education). The National Business Education Association has also included personal finance within their national standards and the Jump$tart Coalition for Personal Financial Literacy has developed personal finance standards called "benchmarks and guidelines," which are accessible on their Web site (www.jumpstart.org) under "Downloads."
Standards-based education differs significantly from traditional content-based education. In the traditional learning process, students memorize isolated bits of information, which can, hopefully, be applied to future tasks/problems/issues/questions that they encounter in the near or distant future. Students demonstrate their competency through paper and pencil tests of memorized facts. In standards-based education, the process is reversed. The learning process begins with tasks to be completed, problems to be solved, issues to be explored, and questions to be answered. Students are given lessons, assignments, and tests that prepare them to demonstrate and apply required knowledge and skills. Over time, a student's repertoire of learning experiences grows into an increasingly comprehensive base of knowledge and skills that permits him or her to advance to more complex and difficult unknown future situations.
As shown in Appendix A, there are four components of standards-based instruction:
Contrary to traditional instruction, where there is generally one "right" answer, problems or issues can have many possible solutions or courses of action. They should also be connected to "the real world" and be relevant to the interests of learners (see Appendix B). The 1991 SCANS report describes "a three-part foundation" that students need for future success:
As state education agencies and local school districts incorporate curriculum standards into their educational plans, they need to develop or identify curricula and materials to help students acquire the knowledge and skills associated with those standards. The alignment between a particular curriculum, the NEFE High School Financial Planning Program®, and two New Jersey curriculum standards that address financial literacy will be discussed later in this paper.
Personal finance education is a "natural" for standards-based education. In the future, educational reformers tell us, all classroom experiences should be connected to real life issues. Some of the most critical problems in American society today can be addressed through programs that enhance financial literacy. Problems such as sky-rocketing bankruptcy filings, rising consumer credit delinquencies and poor credit ratings, lost productivity in the workplace due to employees' poor financial practices (see Garman, 1997), and inadequate savings for retirement can all be improved through increased financial knowledge (e.g., characteristics of various investments) and skills (e.g., how to balance a checkbook). The potential long-lasting benefits to both individuals' financial security and to society make financial education imperative in all school curricula.
Educational reform models call for creative and interdisciplinary approaches to instruction. Complex issues requiring many kinds of knowledge should be the focus of a curriculum. These are issues that cannot be solved within one discipline alone, but require the integration of subject matter from several disciplines. Personal finance is a prime example of an interdisciplinary subject that is connected to real life and requires students to develop and apply competencies in English (e.g., writing a financial plan), mathematics (e.g., calculating the impact of compound interest), social studies (e.g., learning about economic systems), economics (e.g., learning about economic concepts), and consumer economics (e.g., learning to make wise purchase decisions). Using real life financial problems that people face daily (e.g., opening a bank account), and then applying a systematic problem solving approach to these problems, gives meaning and relevance to students' educational experiences.
It is interesting to note that disciplines as diverse as mathematics, business education, and English often make use of personal finance topics (e.g., problems or essays involving money) to illustrate portions of their subject matter. If these disciplines provide the only exposure that a student receives to personal finance, then the result is "spot-coverage" where personal finance skills are learned without the context of the financial planning process. Although some piecemeal financial education may be better than nothing, it cannot substitute for the logical, sequential, in-depth, and comprehensive focus of a personal financial education curriculum.
Just as important as the use of real-life problems and issues in teaching is the need to develop assessment criteria that measure whether or not student work reflects the financial proficiencies needed to perform successfully in today's world. Here again, a comprehensive personal finance curriculum that includes a multitude of learning activities and assessment tools is a must. Increasingly, as standards-based education becomes more widely accepted, teachers and school administrators will recognize the need to align assessment with standards. Already, countless hours have been spent in New Jersey and nationwide locating or designing student activities that provide evidence of achievement of standards.
Making personal finance decisions is an essential skill for adult living. Yet, according to several recent studies, relatively few young adults learn about personal finance while they are in school. The 1999 Youth and Money Survey, sponsored by the American Savings Education Council (ASEC) and the Employee Benefit Research Institute (EBRI), found that only 21% of high school and college students have taken a course on personal finance. This is not surprising as only 16 states require schools to offer an economics course and only 13 make economics mandatory for graduation. New Jersey is not one of these states. School curricula are generally determined on the local level and, for a variety of reasons (e.g., funding limitations, higher priority courses, literal interpretation of state standards), personal finance courses are often not offered.
A nationwide survey of 1,532 high school seniors in 1997, commissioned by the Jump$tart Coalition for Financial Literacy found an average (failing) score of 57.3% on a test of personal finance topics. In addition, the study correlated mean scores on the test by state with the number of bankruptcy filings in each state. Results of the analysis showed that the mean score on the testing instrument was 55.6% in states where the rate of bankruptcy filings was very high (above one and a half percent of households). Conversely, in states where the bankruptcy rate was very low (below one half of one percent of households), mean test scores were 70.3%. After controlling for other factors, the authors of the study concluded that financial literacy (or lack thereof), while by no means the sole cause, appears to be an important factor affecting the number of bankruptcy filings in a state. "If a state has a high rate of bankruptcy, it probably does little to insure that its citizens are well educated in personal finance," concluded researcher Dr. Lewis Mandell. New Jersey's bankruptcy rate when the study was conducted was between one and one and a half percent of households.
The Jump$tart Coalition conducted a follow-up study of the financial literacy of 723 high school seniors in 2000. Participants in the 2000 survey answered 51.9% of the questions correctly on average. Interestingly, the survey findings showed that experience alone is not the best teacher of money management. Students who owned a credit card, for example, scored worse than teens that didn't use a credit card and students who received a regular allowance scored worse than teens that did not. On the other hand, there was some evidence that students had higher knowledge levels with interactive classroom training. Students who participated in a high school stock market simulation scored better on the survey than those who completed an entire course in economics.
The study by ASEC and EBRI, noted above, surveyed 1,000 16 to 22 year olds and concluded that they don't know as much about personal finance as they think they do. Many of these students reported feeling confident about their understanding of financial matters but their "knowledge" was not consistently reflected in sound financial behaviors. For example, among those who felt they did a very good job of managing their money, 27% did not think that saving regularly is a very high priority.
Several studies have investigated the effect of personal finance education upon subsequent financial decision-making. A national evaluative study was conducted in 1997-98 of the financial behavior and knowledge of participants in the NEFE High School Financial Planning Program® (HSFPP). This program is sponsored jointly in New Jersey by the National Endowment for Financial Education® and Rutgers Cooperative Extension. Survey results indicated that students can, and do, respond positively to instruction aimed at improving money management skills.
Significant increases in knowledge, self-confidence, and financially responsible behaviors were found. For example, three months after participating in the HSFPP, over half of the students surveyed reported a change in both spending (58%) and savings (56%) habits. The mean scores for survey questions increased significantly compared to when students had just completed the course. Greater percentages of students reported that they "almost always": compare prices when shopping (44.5%), set money aside for future needs or wants (40.5%), and repay the money they owe on time (60%). Not only do study results show that the HSFPP is an effective educational program, but self-confidence and financial skills are attributes that are likely to stay with students for life.
Perhaps most significant is the long-term impact of financial education reported in a compelling study by Bernheim, Garrett, and Maki. They compared states where financial education was mandated 15 to 20 years ago with those where it was not. Results indicated that curriculum mandates increase exposure to financial education and ultimately elevate the rates at which individuals save and accumulate wealth during their adult lives. Results indicated that 15 to 20 years later, those who received personal finance instruction had greater wealth, by one full year's earnings, when compared with those who did not receive instruction. In addition, the savings rate was 1.5 percentage points higher among those who received financial education when compared to those who did not.
Viewed together, the studies reported above, describing the lack of financial literacy among high school students and the positive impacts of financial education, make a strong case for the need for, and benefits of, personal financial education in the schools. Unfortunately, statistics alone cannot always make a convincing case for implementing a new curriculum. Many schools face substantial barriers such as time constraints, funding limitations, and lack of teacher training. Fortunately, these barriers can all be overcome with the NEFE High School Financial Planning Program® (HSFPP). First, the curriculum is flexible and can be completed as a "mini-course" in as little as 10 hours or expanded to encompass an entire semester. Second, the course is noncommercial and provided at no cost to public and private schools nationwide. Lastly, free or low cost HSFPP workshops are provided to New Jersey teachers by faculty of Rutgers Cooperative Extension, often with the assistance of bankers and other financial services professionals. Training sessions are scheduled periodically around the state or can be conducted, upon request, for pre-formed groups of teachers or their professional associations. An example is a series of workshops for the state Juvenile Justice Commission in 1999.
The HSFPP is a seven-unit course that presents the financial planning process in a sequential, topical approach. It was developed by the National Endowment for Financial Education® (NEFE) and is sponsored in partnership with the Cooperative Extension System and the Credit Union National Association, Inc. (CUNA) and its network of affiliated credit union leagues. NEFE is a non-profit foundation, headquartered in Englewood, Colorado, dedicated to the mission of helping Americans acquire the information and gain the skills necessary to control their financial destiny. The Cooperative Extension System is a national educational network established in 1914 as a partnership of the U.S. Department of Agriculture, state land-grant universities (Rutgers University in New Jersey), and county governments. CUNA serves more than 90% of America's 11,200 credit unions, which are owned by more than 78 million consumer members. Additional information about these co-sponsoring organizations can be found on the websites www.nefe.org, www.cuna.org, nifa.usda.gov, and njaes.rutgers.edu.
HSFPP materials include a 157-page student workbook and personal finance portfolio (i.e., worksheets for students to create their own personal financial plan as an assignment or "exam") for each student and a 615-page instructor's manual. The instructor's manual is self-contained, with each unit consisting of a teaching outline and lesson plan, the subject matter content, overhead masters, supplemental materials, and assessment tools. The subject matter content of each unit also includes student assignments, activities, and teaching ideas.
As noted above, HSFPP materials are available free of charge. To obtain a copy, call the HSFPP office at NEFE (303/224-3511) or New Jersey HSFPP co-representatives Dr. Barbara O'Neill (973/579-0985) and Rita Wood (609/265-5051). An introductory packet, including a copy of the student workbook, will be sent initially. When teachers commit to offer the course and complete a "Sponsorship Agreement Form," they are sent a copy of the instructor's manual. The seven course units focus on decision-making and goal setting and a six-step financial process that includes career planning, earning an income and taxes; spending plans/budgets; using and managing credit; risk management techniques (e.g., insurance); the time value of money; saving and investing; and developing a personal financial plan. The learning objectives for each unit are listed in Appendix C.
The New Jersey Core Curriculum Content Standards were published in May 1996 by the state Department of Education following several years of development by standards working groups and input from state legislative committees and the general public. The standards are subject to revision every five years, with an updated version expected in 2001. According to the document that describes the standards, they "define the results expected but do not limit district strategies for how to ensure that their students achieve these expectations." The Core Curriculum Content Standards describe what students should know and be able to do in specific academic areas and across disciplines. Indicators of progress are indicated for three specific benchmark grades: 4, 8, and 12.
The New Jersey curriculum standards consist of five cross-content workplace readiness standards, which apply to all areas of instruction, and seven academic content areas. The five cross-content workplace readiness standards are:
The seven academic content areas contained within the standards are: visual and performing arts, comprehensive health and physical education, language arts/literacy, mathematics, science, social studies, and world languages. It is important to note, however, that other subjects that were not specifically identified in the standards are referenced in the 125 cumulative progress indicators that provide the detail for the standards.
Use of these progress indicators is encouraged with the following statement: "Several other specific curriculum areas have not been designated as separate components of the core curriculum. These include family and consumer science, technology education, business education, and other occupational areas. However, these content areas can contribute to students' achieving the expected results set forth in the standards, especially the cross-content workplace readiness standards. In addition, these programs provide students with opportunities to apply, and thereby reinforce, learning from the core curriculum content areas."P The standards document also notes that teaching strategies have to change: "An educational environment which focuses on the use of repetitive and low-level cognitive activities is not appropriate preparation for the demands of the next century. Curricula must contain challenging ideas and tasks allied to real-life, problem-solving activities that stimulate reasoning, foster creativity and an integration of knowledge, and develop evaluative, decision-making skills."
As noted above, personal finance education is not specifically identified as one of the seven academic content areas in the New Jersey Core Curriculum Content Standards. However, it is alluded to in several of the cumulative progress indicators and can be used as a "real life" application of the critical thinking, decision-making, workplace readiness, mathematical, and language arts skills that are required by the standards. Indeed, this type of application is encouraged.
Personal finance issues, such as auto insurance and credit cards, are of interest to teens and can be the "hook" with which they apply other subject matters. Two sections of the New Jersey curriculum standards that particularly relate to, and can be used as the basis for, personal finance education are:
"All students will develop career planning and workplace readiness skills."
Cumulative Progress Indicators: All students will be able to:
# 3. "Identify career interests, abilities, and skills."
# 4. "Develop an individual career plan."
#12. "Demonstrate consumer and other financial skills."
"All students will acquire historical understanding of economic forces, ideas, and institutions throughout the history of New Jersey, the United States, and the world."
Cumulative Progress Indicators: All students will be able to:
# 1. "Explain and demonstrate the role of money in everyday life."
# 4. "Distinguish between wants and needs."
# 6. "Identify and differentiate among various forms of exchange."
# 8. "Describe the interaction of various institutions that comprise economic systems (e.g., banks)."
# 9. "Explain and illustrate how attitudes and beliefs influence economic decisions."
#15. "Evaluate an economic decision."
Virtually the entire NEFE High School Financial Planning Program® can be used to teach topics that meet the core curriculum content standards. Each chapter contains information that can be used to apply mathematical or critical thinking skills, for example. Listed below are six specific examples of applications of the HSFPP:
Many of New Jersey's young adults are leaving school without the knowledge and skills necessary to make critical life decisions (e.g., wise use of credit, developing a spending plan, purchasing auto insurance). Yet, ironically, the state Core Curriculum Content Standards, including the two discussed above, specifically encourage the development of critical thinking skills and the use of real life applications of subject matter. The confluence of two major influences in society, educational reform and poor consumer financial management behaviors, provides an opportunity and an impetus for financial education to be universally included in schools.
The New Jersey curriculum standards are, quite simply, a set of desired outcomes for students. They are not a curriculum that teachers can pick up and use in the classroom. In order to adequately prepare students for the future, teachers need curricula that are closely aligned with the objectives and progress indicators of particular standards. The NEFE High School Financial Planning Program® (HSFPP) is a well-developed course of study. It is unbiased and available at no charge. The HSFPP is a valuable instructional resource for increasing the financial literacy of New Jersey youth, as well as meeting the core curriculum standards. Other effective curriculum materials are available through the Jump$tart Coalition for Financial Literacy Web site (www.jumpstartcoalition.org).
Following are additional recommendations with respect to personal finance education for New Jersey schools:
A nation at risk: The imperative for educational reform (A report to the nation and the secretary of education) (1983). Washington, DC: The National Commission on Excellence in Education.
Bernheim, B.D., Garrett, D.M., & Maki, D.M. (1997). Education and Savings: The Long-Term Effects of High School Financial curriculum Mandates. Cambridge, MA: National Bureau of Economic Research inc., Working Paper No. 6085.
Boyce, L. & Danes, S. (1998). Evaluation of the NEFE High School Financial Planning Program,1997-1998. Englewood, CO: National Endowment For Financial Education.
Financial Literacy Declining Among 12th Graders--Coalition Urges States to Include Personal Finance in Curriculum Standards (2000, April 6). Washington DC: Jump$tart Coalition for Personal Financial Literacy (press release).
Garman, E.T. (1997). Retirement savings and the poor financial behaviors of workers. Personal Finances and Worker Productivity, 1(1), 45-49.
High School Seniors Fail Personal Finance (2000, April 6). The New Jersey Herald, p. A1.
High School Seniors Lack Financial Smarts, Survey Shows (1999, Fall). Jump$tart Update, 1(1), 3.
Huddleston-Cass, C., Danes, S., & Boyce, L. (1999). Impact Evaluation of a Financial Literacy Program: Evidence for Needed Educational Policy Changes. Consumer Interests Annual, 45, 109-114.
Lord, M. (1999, June 14). It's Never Too Soon for Econ 101. U.S. News & World Report, 58-59.
National Standards for Family and Consumer Sciences Education (1998). National Association of State Administrators of Family and Consumer Sciences.
Strang, L. (1998, Summer). Bankruptcy Rates Linked to Financial Literacy, Says Jump$tart. Jump$tart Update, 2(3), 3.
The 1999 Youth and Money Survey (1999). Washington DC: American Savings Education Council.
Two-Thirds of American Students Say They Need To Know More About Money Management (1999, April 26). Washington DC: American Savings Education Council (press release).
Voluntary National Content Standards in Economics (1997). New York, NY: National Council on Economic Education.
What We Need to Know About Money (1999, April 18). Parade Magazine, 4-6
What work requires of schools: A SCANS report for America 2000 (1991). Washington DC: The Secretary's Commission on Achieving Necessary Skills, U.S. department of Labor.
Portions of this paper were excerpted, with permission, from the following reference:
Kerbel, C. (1999, July). Cross-Referencing National Standards for Family and Consumer Sciences Education and Economic Education with the NEFE High School Financial Planning Program from the National Endowment for Financial Education. Warwick, RI: The Center for Personal Financial Education.
Special thanks to the following persons who reviewed the first draft of this paper and offered helpful suggestions:
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