Financial literacy is back is in the headlines in the Washington, DC metro area. Last year, Maryland adopted a statewide financial literacy curriculum, and Maryland Comptroller Peter Franchot is pushing for officials to make financial literacy graduation requirement for Maryland high school students. In 2009, the Virginia Board of Education unanimously passed a similar measure requiring a one-course credit in financial literacy for Virginia high school students. And this year’s freshman class is the first group to face the new graduation requirement.
With such support for financial literacy in surrounding states, it begs the question: what is the state of financial literacy in Washington, DC?
DC Financial Literacy Progress Report
In 2009, DC Mayor Adrian Fenty and the DC Council passed the Financial Literacy Council Establishment Act of 2008. According to the Act, the group was supposed to be formed soon thereafter, and Mayor Fenty was supposed to submit a plan to the Council for implementing financial literacy education in public schools within 180 days. So what’s happened over the last four years? Not much.
There have been a few random mayoral appointments to the Council, but the former Mayor never appointed all the members. As a result, the group never met. It’s quite a shame considering the city’s CFO signed off on a fiscal impact report in 2008 stating that there was sufficient funding to move forward with the DC Financial Literacy Council through 2011. So where did the money go, and why was the Council never appointed? Who knows. But one thing is certain, youth financial literacy needs to find its way back on the agenda in the District of Columbia in 2012.
For the last two years, DC high school students have scored lower than any other state, territory or district in the United States on the National Financial Capability Challenge. On average, DC students scored 56% in 2011 – 13% lower than the national average. By contrast, Maryland scored a 66% and Virginia students scored 69%. While their scores are nothing to brag about, Maryland and Virginia are taking action to improve results in the future by educating students about personal finance in the classroom. If you aren’t convinced that financial literacy needs to find its way into classrooms around the country, then check out Jump$tart’s Building the Case for Financial Literacy for more facts and figures on the need for youth financial education.
Why DC is Falling Behind on Financial Literacy
Last fall, the Greater Washington Jump$tart Coalition organized its first Financial Literacy Forum to bring local legislators and city leaders together to discuss the city’s progress on financial education in the District. Without exception, participants such as Councilmember Yvette Alexander and Councilmember Muriel Bowser’s legislative director, Rob Hawkins, agreed that more needs to be done. While the Forum was a great starting point, getting financial literacy into the DC’s public schools will be a formidable challenge. Why?
- Bigger Problems – DCPS is one of the worst-performing school systems in the country, and they are clearly focused on improving core reading and math skills. With one of the highest dropout rates in the nation, many city and school officials put financial literacy low on the their list of priorities.
- Teaching to the Test – Teachers struggle to find adequate time to dedicate to teaching financial literacy in the classroom. Teachers are judged by the performance of their students on exams. By spending time teaching non-core topics like financial literacy, they put themselves and their students at risk of performing poorly on tests.
- Lack of Financial Literacy Standards – DC has not adopted any financial literacy standards – a necessary step in the process. While personal finance courses may be offered as electives in some schools, is not a unified set of learning standards recognized in DC.
- Bureaucracy and Red Tape – DC is a difficult bureaucracy to navigate and financial literacy can easily slip through the cracks. Case in point, the Mayor’s Council for Financial Literacy.
- Lack of Funding – DC has started to see the impact of financial mismanagement on a massive scale as the city struggles to find funding for many of its major education programs. Perhaps the city’s leaders should take a course on financial management alongside students.
- Teacher Financial Illiteracy – According to a study by the National Endowment for Financial Education, 89% of teachers agree that agree that students should take a financial education course or pass a financial literacy test for high school graduation. But only 20% of teachers feel they have the knowledge and skills needed to teach financial literacy in the classroom.
How DC can Improve in Financial Literacy
While DC has many challenges to overcome, it cannot afford to keep financial literacy off the agenda any longer. Whether or not DC students graduate high school, they all will have to manage their money one day. So why not teach them how to manage their personal finances responsibly?
Many states have adopted financial literacy standards, and some have been able to make financial literacy a graduation requirement. Rather than reinventing the wheel, DC can look to its neighbors for guidance. Here are some of the ways other states have been successful in the financial literacy efforts:
- Leadership – Whether it is the Mayor, a Committee Chair or a Councilmember, DC needs a real leader to step up to show support for youth financial education. In Virginia, Bob McDonnell was a major supporter of financial literacy graduation requirements. In Maryland, Peter Franchot has stepped up. Which leader will emerge as the champion for financial literacy in the District?
- Collaboration – In every state that has been successful passing financial literacy graduation requirements, collaboration was a critical success factor. One of the first states to demonstrate the power of collaboration in financial literacy was Wisconsin (see the Wisconsin Model). The Maryland Coalition for Financial Literacy was a driving force behind Maryland’s success. In Virginia, the Virginia Jump$tart Coalition and Virginia Society of CPAs led the charge. Similarly, DC must bring key players from the public, private and nonprofit sectors to move forward.
- Funding – In the financial literacy field, the majority of the funding comes from banks and depository institutions that are required to “reinvest” in the communities where they do business (see Community Reinvestment Act. As a result, many banks have formed foundations that donate funds to organizations focused on serving low-to-moderate income and minority communities. While some of the money trickles down to support youth financial education, more funding will be needed to support the full-scale implementation of financial literacy programs in schools across the District.
- Teacher Training – Without teachers, financial literacy doesn’t happen. Many states realize this and have coordinated annual teacher training events. By equipping teachers with the knowledge and tools needed to teach personal finance skills, we can ensure students receive higher-quality instruction and help teachers make better financial decisions in their own lives.
The Bottom Line
The District of Columbia has a long way to go to improve its youth financial literacy efforts. Fortunately, its neighboring states have demonstrated how financial literacy programs can be developed and implemented in schools. By collaborating with partners and leveraging the expertise of local financial literacy leaders, there is a ton of potential for financial literacy to get back on the agenda in DC.