Part of financial literacy is knowing how money works, which is common instruction in schools that offer a personal finance class. But to be truly capable, and enjoy better outcomes, adults must also understand the social and emotional aspects of money. That constitutes The Missing Half of financial education. In this series, Right About Money contributor and award-winning financial literacy teacher Brian Page examines how to nurture behavioral skills that lead kids to better financial outcomes in adulthood. The links below take you to the entire series.
American students in grades K-12 can count themselves fortunate if exposed to a personal finance class. Most states still have no such requirement. Yet even those who get this instruction typically get only half of what they need.
Teaching students the mechanics of money management in a math or social studies class, or out of a workbook, doesn’t even touch on the most important part—the behavioral aspects of handling money, like how to control impulses and set goals. This void has stirred an undercurrent from critics of school-based financial education that claim financial literacy lessons do not lead to better outcomes.
But we have to stay with it. Researchers are learning more everyday about models that lead to behavior change. Last fall, the Consumer Financial Protection Bureau unveiled a groundbreaking report that identified traits in children that lead to better money habits as adults. The key building blocks:
Executive function Developed from ages 3 to 5, this skill facilitates problem solving and self-control. It supports goal setting, flexibility and perseverance. It manifests in adult life as setting financial goals and sticking to a budget.
Habits and norms Developed from ages 6-12, this is essentially embedded rules of thumb that support smart money management and manifest in adult life as behaviors like paying bills on time and avoiding penalties and late fees.
Knowledge and decision-making Developed from ages 13-21, this essentially is acquired factual knowledge and the ability to research and analyze. It supports financial planning and smart purchase decisions, and manifests in adult life as comparison shopping and sorting through marketing and sales pitches.
Such research is feeding a movement to integrate social and emotional learning into traditional curricula. Harvard’s Graduate School of Education recently pointed out that executive function is the foundation for many important life skills, like planning and problem solving. Such skills, of course, are fundamental to managing money well.
Leading this movement is the Collaborative for Academic, Social and Emotional Learning, often referred to as CASEL. This group of educators seeks to make social and emotional learning an integral part of education at all levels across all courses. Social and emotional competence increases a student’s likelihood of graduating, managing at college and excelling at work.
It also has broad application in financial capability, which is all about what we know about money and how we use that information to better our financial standing. Now is the time for financial educators to include social and emotional learning as a pillar of financial education. Today, Right About Money begins a series, The Missing Half. As April financial literacy month winds down, we will examine the role of social and emotional learning in financial literacy.