Austin R. Cooper, Jr., Managing Editor
Our House D.C. Newsletter
The mission of the National Financial Educators Council is rooted in providing people with the knowledge and guidance they need to foster greater financial well-being. To accomplish that mission, the organization mobilizes a diverse global force of financial wellness champions and empowers them with resources and training so they can effectively support others in their communities to work toward greater financial security. (https://www.financialeducatorscouncil.org)
Operation HOPE is a nonprofit organization committed to disrupt poverty and empower inclusion for low and moderate-income youth and adults. With a mission of expanding economic opportunity and making free enterprise work for everyone, Operation HOPE partners with financial institutions, corporations, municipal agencies, and community agencies to deliver the financial tools and education on financial literacy necessary to ensure a better future for all. (www.operationhope.org)
The National Financial Educators Council and Operation HOPE are two of the many organizations across the United States that provide the resources and tools to Americans to not only improve their financial health, but to become homeowners, as well. Indeed, there are many who are wary, and even fearful, of the qualification process for homeownership.
For far too many, the American Dream of one day owning a home is out of reach. A distant and unachievable dream.
Thankfully, there are organizations like The National Financial Educators Council and Operation HOPE that can assist interested homeowners achieve their dreams.
At Operation Hope, for example, the first step for prospective homebuyers is to attend a workshop for potential homeowners, conducted by certified coaches from the U.S. Department of Housing and Urban Development (HUD). These coaches guide clients through the loan process. The goal is to help clients overcome a variety of common barriers to homeownership, including bad credit, lack of down payment, existing debt, and money management issues.
Importance of Financial Literacy for Youth
One way to impact financial literacy in adults seeking to become homeowners is to make the teaching of financial education mandatory in school curriculums at an early age. The Council for Economic Education every two years examines the financial and economic education in the United States in grades K-12. The February 2020 report concluded that:
- 21 states now require high school students to take a course in personal finance, an increase in 4 states from 2018. One state dropped the requirement.
- 25 states require high school students to take a course in economics, an increase of 3 states.
- 5 states, including the District of Columbia, require no personal finance classes in their curriculums.
- While more states are requiring economics and personal finance to graduate, 6 fewer require economics testing and 2 fewer require such in personal finance.
The report further offers that with states requiring financial education in schools, students exhibit more mature and informed behavior with budgetary decisions while in college, particularly those from economically and socially challenged communities. “In states without requirements, there is a 15-point gap in access to financial education between kids from lower-income versus wealthier families.” (www.councilforeconed.org)
In an October 2019 article for Kiplinger, Craig Hawley reports that in 2009, the brokerage firm FINRA, in its State of U.S. Financial Capability study found that “42% of respondents were able to answer four or more questions correctly in a five-question survey on fundamental concepts of economics and personal finance. By 2018, this dropped 8 percentage points to 34%.” (https://bit.ly/3mBSR9t)
Financial literacy is the knowledge and understanding of areas related to financial decisions, including personal finance, money and investing. More work remains among the American population in general, especially with young people. There has always been a direct correlation in understanding and appreciating financial literacy and achieving the American Dream of homeownership. And the fact remains that nothing will change that reality.
As former United Nations Ambassador Andrew Young once said on the topic of financial literacy, “To live in a system of free enterprise, and to not understand the rules of free enterprise, must be the very definition of slavery.”
While this doesn’t subtract from the validity of the story, it is worth noting that CEE’s bi-annual report does not rely on data from high school course catalogs, it looks purely at state policies. There’s nothing wrong with that, BUT it does overstate the level of access to financial education. Earlier research from Montana State University shows that in states that require personal finance as an embedded part of another course (which is the case in 12 of the 21 states) only 1 in 3 schools actually teaches any personal finance at all. Why? Implementation really matters. Putting yourself in teachers’ shoes… think about what you’d do if your state asked you to cram additional standards into your courses. Do you cram them in, teaching both your original course and the new standards in a rushed, ineffective way? Or do you stick with your original standards so at least you can do them justice? The “21 states” blurb does not take this implementation decision into account; it includes states that require personal finance to be embedded in economics or another course. There are 9 states that currently require (*or have recently committed to requiring) at least one standalone semester of personal finance for all high school students: Alabama, Mississippi*, Missouri, Nebraska*, North Carolina*, Ohio*, Tennessee, Utah, and Virginia. Rhode Island is close. Texas and Nevada are moving in that direction, too.