California Financial Literacy Standards

When it comes to public education guidelines for teaching financial literacy, where does California fall? The Golden State’s grade is “F” in that arena, according to the Champlain College National Report Card on financial literacy. Champlain rates each state on its personal finance education benchmarks every two years. California’s grade is based on the fact that content standards adopted by the State Board of Education to define the knowledge, concepts, and skills every student is required to learn do not include personal finance. The minimal financial literacy curriculum offered is incorporated into mathematics courses and one semester of economics.

The California Department of Education does recommend that schools offer a 9th-grade course in personal finance, but there is no requirement that districts do so. Even should this recommendation be followed, it will be several years before most freshman students put this knowledge to use, and therefore their learning can be expected to fade before they actually need it. In addition, the DOE suggests that some financial literacy-based subjects be taught at the 12th-grade level; however, those topics lack sufficient educational rigor.

On July 14, 2016 California financial literacy standards for 9th- and 12th-grade students were adopted by the State Board of Education. These guidelines can be found in the History–Social Science Framework.

The financial literacy requirements are elective for 9th-grade students and mandatory for 12th-grade students. The personal finance subject matter is built into the economics coursework for high school seniors. The State Board does not require specialized training for teachers to deliver the new personal finance requirements.

CA Financial Education Standards by Grade Level

0
Financial Education
Requirements
K – 2nd Grade
0
Financial EducationRequirements3rd – 5th Grade
0
Financial EducationRequirements6th – 8th Grade
0
Financial Education Requirements 9th Grade Elective 12th Grade Mandatory
The 9th-grade standards can be found in Chapter 14, line items 732 through 768, in the “Elective Courses in History–Social Science” section. Some of the suggested topics include comparison shopping, cost/benefit analysis, the concept of paying yourself first, and a basic understanding of credit.

Copy below from the California Department of Education, Chapter 14, line items 732 through 768, in the “Elective Courses in History–Social Science” section

Lines 732 – 768
“Financial Literacy

How can I best manage my money to make sure I have enough to reach my financial goals?

A survey released in February 2008 by Dartmouth College and Harvard University researchers found that only 35 percent of respondents were able to correctly estimate how interest compounds over time; more than half of respondents did not understand how minimum payments are calculated and applied to a principal balance; and almost none of the respondents understood the financial difference between paying in monthly installments versus one lump sum at the end of a certain time period.

The financial crisis that began in the United States in July 2007, and which led to a global recession, indicates the dangers of a society with many citizens who do not understand basic financial principles. This elective course provides students with financial literacy skills to prepare them for the economic realities and responsibilities of adults in our society.

The course includes information about earning an income. Students explore jobs and careers that might be of interest and identify the advantages and disadvantages of different jobs. They conduct research on a certain career, finding income paid and human capital required, and use cost/benefit analysis to evaluate post-secondary training and/or education. They look at a pay stub and identify gross income, net income, and the kinds of deductions that are involved.

They learn about fixed and variable expenses and develop a budget for a high school graduate living on her/his own, recognizing scarcity, alternatives, choice and opportunity cost. Students learn to apply cost/benefit analysis to decisions that involve comparison shopping. They discuss the advantages and disadvantages of saving and learn about “paying yourself first” and the power of compound interest. Students learn about different types of financial institutions, the services they provide, and the advantages and disadvantages of using these services. Students learn to evaluate wise and unwise credit choices. They discover how credit works and the impact of interest rates and the dollar amount of monthly payments on the length of the loan and the total amount paid. They learn about the criteria that a lender uses to evaluate a loan application including credit scores. They learn about state and federal laws related to personal finance (e.g., bankruptcy). They understand the investment risk/reward tradeoff. They use online calculators to investigate mortgage loans, retirement funds, and other interest related calculations. Students learn the dangers of identity theft and ways to minimize the risk of such thefts.”

The 12th-grade California financial literacy standards can be found in lines 18 – 20, 73 – 135 and 307 – 310 of the “Principles of Economics” framework. Subject matter includes understanding take-home pay, basic budgeting, lessons on debt, and the process of paying bills.

The following section is reprinted directly from the Copy below from the California Financial Literacy Standards developed by the California Department of Education, lines 18-20.

Lines 18 – 20
“What does it mean to be financially literate? Understanding how the economy functions and how economic reasoning can inform decision making will provide students with the tools they need to become financially literate and independent.”

Line 73 – 135
“Fundamental Economic Concepts and Reasoning
• How are resources allocated?
• What is a market economy?

Students might begin learning about economics from a personal perspective; in other words, to get invested in the discipline students can begin their study of economics by seeing their place in it, starting with personal budgeting and moving outwards to identify their economic place in the world through a multitude of layers. Teachers might begin by telling students they will be assigned a unique (and imagined by the teacher) economic identity: this identity initially consists of a monthly salary, a list of bills, and a checkbook or an online system of sending and receiving money. Starting with their monthly salary, students are directed to determine their take home pay by subtracting federal and state taxes (teachers can provide this information to students or have students locate it and estimate their rate based on their salary). Next, students must pay their bills. Bills consist of a pre-determined amount for these categories: rent/mortgage, utilities, cell phone, student loan payment, car payment, car insurance. Once bills are paid, students allocate money for the remainder of the month. They can choose whether or how much to save; how much to devote to food, gas, and other staples; and how to use any discretionary money left over. Once students have divided their resources for a month, they should take a step back and look at their larger budgets, perhaps using budgeting tools online, making charts or graphs to understand how and where they spend money.

With a budget in hand, students can begin to learn about different kinds of debt and different kinds of ways of accumulating personal wealth. Starting with debt, teachers provide students with an overview of what a credit card is, how interest gets calculated, what compound interest consists of, and how credit card debt affects individuals in the marketplace. Students can calculate credit card payments and factor that into their contrived economic identities for practice. In addition, teachers can provide similar overviews of student loan debt and mortgage debt and explain how these latter forms of debt are often considered “helpful” debt in the individual’s long-run as they contribute to more opportunities for wealth over the course of a lifetime. Still, these forms of debt can be calculated and similarly factored into their contrived economic identities.

Students should also learn about different options of saving money. While teachers will go into more depth later in the semester about marketplace investments (in which students can learn to “play” the stock market, for example), students can learn now about different options for saving their resources from their above-described budgets. Teachers might offer students three options for investment: for example, a zero-risk very small interest savings account or CD, a small risk mutual fund, or a higher risk investment. Provided with data supplied by the teacher, students can calculate their wealth from their above provided identity over time and extrapolate where they will be in one year, five years, fifteen years etc. all the while working through compound interest and acknowledging that interest rates vary significantly depending on many factors in the economy. At the end of this initial unit, students should come away with an up-close look at their stakes in the economy and can begin to place larger concepts in the frame of their own place in it.

By learning about personal finance from this individual perspective, students will now learn about how international markets are interrelated and how they affect their own finances and economic opportunities. At the more local level immediate relevance can be achieved by discussing city and/or county budgets (i.e., revenues and expenditures), payday loans, rent-a-centers, and even chambers of commerce. Studying these topics now will help students when they become adults, and must confront decisions about household budgets, student loans, credit cards, mortgages, and savings and investment strategies. Just as students began this course learning about personal finance, the concepts can be woven throughout the course, applying the economic ideas and analytical tools mentioned above to other sectors of the economy. Budgeting can be taught as an example of scarcity; job applications can be taught as examples of human capital inventories; student loans can be taught as an investment in developing human capital; use of credit cards can be taught to explain the opportunity cost of interest and repayment; and interest on credit can be taught as an example of price determination through supply and demand.”

Lines 307 – 310
“An additional way that students can address the question How do banks and markets function? is through practice. As with their initial imagined budget and personal finance exercise, students can extend that same set of circumstances to financial markets. Provided with a budget and clearly-defined set of financial goals, students can make simulated investments in the stock market and analyze changes in their value over time.”

CA Financial Literacy Standards Review – NFEC Ranking

California has no current financial literacy mandates. The proposed AB-2927 “An act to amend Section 51225.3 of the Education Code, relating to pupil instruction.” fails to meet the minimum education standards for other core subjects taught in high school; and students who complete the coursework proposed will not be prepared for near-term financial challenges. Read more about Bill 2927.

Overall Breakdown of Bill 2927

National Standards for Financial Education

Financial Literacy Standards for Older Youth & Adults (High School through Adults)

Although there is no direct mandate by the California State Board of Education, it is recommended that national standards be implemented. Financial education is a unique subject; all participants have developed financial habits and relationships with money before instruction begins.

National standards are those that have been proven in empirical and theoretical research to produce the highest improvements in participant test scores.

Financial Literacy Standards for Kids (Kids PK through 8th Grade)

In collaboration with education leader Heidi Jacobs, the NFEC created these financial literacy standards to define learning goals and educational targets for optimal child financial education. Guided by strong pedagogical theory, the standards ensure that instructional targets are age- and developmentally-appropriate and that lessons can be effectively scaffolded. Standards represent five sections based on topic areas in the NFEC curriculum.

Standards for Financial Education Instructors

The NFEC teamed with the well-known Danielson Group to develop the first and only national standards for financial educators – The Framework for Teaching Personal Finance – to define optimal educator skill sets and performance levels. The framework also identifies the financial educator responsibilities empirically proven to produce highest gains in participant test scores. This framework is used in all 50 states, including California.

References

For more information on the California Financial Literacy Standards for 9th and 12th grade visit the CA Department of Education website at: http://www.cde.ca.gov/ci/hs/cf/sbedrafthssfw.asp

California Department of Education Chapter 14: Grade Nine – Elective Courses in History–Social Science & California

Department of Education Chapter 18: Grade Twelve – Principles of Economics (One Semester)