Priorities shift during disruption

Just when the movement to include financial education in K-12 schools made noticeable headway in 2019 with several states mandating that curricula include personal finance along with reading, writing and arithmetic, the COVID-19 pandemic closed the nation’s schools in spring 2020.

While school closures certainly pale in comparison to the more than 200,000 COVID-19 related deaths documented in the United States, it appears the advancement of financial education of today’s youth may also fall victim.

A leading youth financial literacy advocate is sounding the alarm.

“Everyone needs financial education, even more so in times of crisis, but my fear is that this topic is not reaching the students it should reach,” said Annamaria Lusardi, founder and academic director of the Global Financial Literacy Excellence Center at The George Washington University in Washington, D.C. where she is a professor of economics and accountancy.

Advisors Magazine reached out to Lusardi for her take on how pandemic-related school closures combined with sporadic re-openings are impacting the financial literacy of K-12 and college students.

While she admits it is too early to “have enough data to provide a rigorous answer,” she does stress it is an important question to be asking – especially on behalf of underrepresented segments of society.


Access to Online Learning Isn’t Always Available
Despite massive efforts to distribute technology to the homes of low-income students, their access to computers and laptops is still drastically limited. Families cannot afford them – especially now that COVID-19 has shut down so many of their jobs – and many homes don’t have internet service. In fact, Pew Research recently documented that 35 percent of low-income household have no access to the internet. Lusardi is concerned they will be left behind in an academic atmosphere where educators are turning to online and virtual learning communities

She isn’t alone.

“The longer this goes on, the longer the pendulum swings to where this could be a generation that’s really left behind,” Beth Tarasawa told the Los Angeles Times in August 2020.
Tarasawa is executive vice president of research with NWEA, an educational research group based in Portland, Oregon.

NWEA worked with the Times to complete a survey of 45 Southern California school districts serving approximately 1.45 million students. The survey used eligibility for free or reduced meals to designate low-income schools (where more than 85 percent of the student population qualify) versus affluent schools (where only 15 percent qualify.) The results show what one might expect at a first glance: The students of low-income schools dominated by Black and Latino populations engaged online at least 20 percent less than did the students from affluent districts where Caucasian and Asian students are the majority.

Impact on Future Paychecks
But that first glance doesn’t tell the full story of how a disruption in education and dependence on digital platforms impacts student learning – including mastery of financial concepts that can shape behavior and decisions now and into adulthood, and lead to better paying jobs. Even if school attendance returns to pre-pandemic norms, educators fear the losses resulting from the pandemic may never be recouped.

In a June 2020 white paper from Chicago-based think tank, McKinsey & Company, stark predictions of long-term harm for individuals and society paint an ugly picture for the future earnings of today’s students.

McKinsey & Company estimates COVID-19 will cost the average K-12 U.S. student $61,000 to $82,000 in lifetime earnings due to the educational opportunities lost during school closures in early 2020 and fitful school re-openings in fall 2020. That is a year’s earning potential for most workers; for some that could represent two years of work. More impactfully, the collective estimated losses for all U.S. students tops $98 billion – a dollar amount that cannot be recaptured and thus provides no positive economic impact.

The Struggle is Real
Time out of the classroom means less time for financial literacy to squeeze itself in between history, geography, and social studies.

Prior to COVID-19, the nation’s teachers already struggled to include financial education. Lusardi quotes the 2020 Council for Economic Education’s Survey of the States documenting that only 21 states require personal financial education in high school.

“What about the other states, are students in those states facing different financial decisions? We need to equip all students, and the earlier, the better,” she said, adding that parents should begin financial education right after the first visit of the tooth fairy.

Advisors in the financial services industry agree that it is never too early to start financial education for children.

“The lessons they learn at an early age will provide the foundation for the financial decisions which will be thrust upon them once they enter college or the workforce,” said Andrea Darden, CEO of Darden Wealth Group in Ann Arbor, Michigan.


According to a 2016 survey by Credit Karma, 68 percent of young adults make at least one of these top four mistakes by age 30: overspending on credit cards, having an account sent to collections, defaulting on a loan or missing payments. Those mistakes can haunt a credit report for the good part of a decade – a fact that 75 percent of the survey respondents indicated was a reality for them post age 30 preventing them from “moving forward” financially toward goals such as higher credit scores, home ownership, and beefing up a savings account.

That bothers Chip Bromley, principal of Innova Wealth Partners based in Newtown, Pennsylvania, who says that personal finance education continues to be left out of educational curriculum at all levels.

“This leaves young adults at risk to learn from their own mistakes rather than be educated on the financial pitfalls prior to running into them,” said Bromley. “Many of these mistakes can result in years of pain due to unsustainable debt, low credit scores, and even bankruptcy.”

Lack of Parental Guidance
One might think that dear old mom and dad wanting the best for junior would have the financial talk with their children. Statistics show it just isn’t happening on a consistent basis.

According to Debt.com, more than half of parents wait until their child is 15 years old before discussing the role money plays in daily life. That’s approach is problematic, according to a 2018 report from Purdue University documenting that children grasp the value of a dollar by age three and that by age seven, the bulk of their money-oriented habits are well engrained in their thinking patterns. Parents that wait until their offspring is 15 have left their child’s perception of money go unchecked for another eight years – plenty of time for difficult-to-break negative habits to develop.

This lack of parent-child money communication doesn’t surprise Scott Sparks, founder and CEO of Sparks Financial in Denver, Colorado.

“We find that there can be a disconnect between parents and children on financial issues and education,” said Sparks. His firm hosts an annual Money Matters event for the teens and young adults of clients. “We know that young adults who are familiar with the way money works make better financial decisions when they grow older. It’s better to begin teaching them the right lessons early than leave it to chance.”

That same sentiment is echoed by Allen Trim, partner and portfolio manager for Blue Summit Wealth Management in La Mesa, California. He sees a lack of guidance at home as a major factor why teenagers and young adults have a hard time understanding the importance of financial responsibility.

“Often, they have never had to deal with it before being required to make significant decisions about the cost of college, a new car, housing or even which part of the world to live in,” Trim said.

He encourages clients to include their children in the financial planning meetings Blue Summit holds with their parents. The firm also offers an outreach training designed for kids.

As noteworthy as efforts within the financial industry to improve youth financial literacy are, advisors work with Americans that can afford to pay for their services. That isn’t every family; in fact, it is far from it. An October 2019 poll by CNBC titled, “Invest in You Survey,” reported that only one percent of Americans use a professional financial advisor. Other analysis puts the number of American families not using the services of an advisor at 54 percent and 62 percent, according to Investors.com and Think Advisor, respectively.

That shifts a lot of the financial education and planning burden back on to the school system, which at this time is still fighting to keep its doors open and classrooms full amidst the ever-changing dynamics of the COVID-19 pandemic.

Playing Catch-up
The instability of delivering education in America under these conditions means students returning to the classroom are doing so having retained much less of what they learned the school year prior.

The Brown Center Chalkboard at the Brookings Institute in Washington, D.C. studies public education trends. At the end of May 2020, Institute forecasters analyzed five million U.S. public school students in grade three through eight to determine how much education retention they were losing having schools closed in March. The conclusion was that the average American student in those grade levels would retain only 70 percent of the gains made in reading that school year and only 50 percent of gains made in mathematics.

That’s not great news for financial education for two reasons: First, math literacy is key to financial education. Second, educators focused on catching students up on math’s tenets of division, multiplication and algebraic equations might not have much classroom time to devote to the topics of compound interest, how to calculate interest on a loan, or how to balance a checkbook.

“Teachers play a critical role here and I hope that teachers will not sacrifice this topic, and, in fact, give it even more attention,” said Lusardi. “For many students, this crisis has generated a lot of anxiety and stress and learning how we can deal with these difficult times is critically important. Schools are a level playing field here, we need their help.”