A number of states now require financial education classes for high school students, covering topics such as budgeting, saving and debt management.

Only seven states (Alabama, Iowa, Mississippi, Missouri, Tennessee, Utah and Virginia) earned an A grade, meaning they require students to take a semester-long personal finance course, or its equivalent, at a “report card” from the Center for Financial Education at Champlain College in Vermont. Five states earned an F, meaning they have “virtually no requirements” for personal finance education in high school.

But according to the report, 23 states are expected to receive an A grade in 2028, when additional programs recently approved by state legislatures are in effect.

The surge in offerings is partly a response to the pandemic, which focused attention on precarious household finances and glaring income inequality. “Things accelerated after the pandemic,” said John Pelletier, director of the center. Higher inflation has also strained consumer budgets, and the resumption of student loan payments has renewed concerns about student debt.

Concern is also growing about financial disparities between racial and ethnic groups. While about a third of American adults report having “too much” debt, the percentage is higher (39 percent) for black adults, according to one study. great survey conducted in 2021 by the FINRA Investor Education Foundation. (The foundation, which is a branch of the Financial Industry Regulatory Authority, a non-governmental regulator that oversees brokerage firms, conducts the survey every three years.)

Black and Hispanic adults are less likely to have an emergency fund to cover three months of expenses in case of job loss or illness, the survey found. And although about a third of adults have “high” financial literacy, as evidenced by their ability to correctly answer four out of five financial questions on topics such as compound interest, inflation and risk, the percentages are much lower for black and Hispanic adults.

Requiring all students to take a financial education course can help reduce that inequality, Pelletier said.

Carly Urban, an economics professor at Montana State University who studies financial education, said discussions about what topics should be taught in classrooms were often deeply divisive, but state lawmakers appear to be finding common ground that supports financial literacy. In secondary school. Most American adults said they wanted their states to require a semester- or year-long financial course to graduate from high school, according to a 2022 survey of the National Fund for Financial Education. And most said they wish they had been required to take that course.

Over the years, questions have arisen about whether high school financial education classes are effective. But recent research by Dr. Urban and others, cited in the new Champlain College report, sheds light on what works. Financial literacy in high school, he said, “overwhelmingly” improves credit scores, reduces loan default rates and reduces the use of risky services like payday loans. It also leads more students to obtain low-interest college financing and away from high-interest loans, and increases repayment rates for first-generation students and those from low-income families.

But a recent study he co-authored with Melody Harvey, an assistant professor at the University of Wisconsin-Madison, found no impact on the eventual retirement savings. Perhaps, she said, for teenagers going to college or just entering the workforce, the thought of retiring is too far away.

“Young people can be obsessed with ‘right now,'” Dr. Urban said. The study recommended that classes prioritize topics more “immediately relevant” to teens, such as budgeting, long-term debt and credit.

Christopher Jackson, who teaches a personal finance course to seniors at Da Vinci Communications High School, a socioeconomically and racially diverse public charter school in El Segundo, California, said he found that students were excited about the idea of save in Roth individual retirement accounts once they understood the concept of compound interest and how investments grow over time.

He advises them to open a Roth IRA at age 18, rather than waiting until they graduate from college and begin a career. One of his students has already saved $14,000, he said.

Mr. Jackson uses a curriculum of Next Generation Personal Financea nonprofit organization that promotes universal teaching of personal finance in high school, as a basis for its instruction and complements it with books on relevant topics, he said.

“You can’t play the money game if you don’t know the rules,” Jackson said. “I teach them the rules of the game.”

Sebastian Torres, 19, a 2022 graduate of Da Vinci Communications, said Jackson’s class, which includes a unit on the psychology of financial decision-making, helped him plan for both college and retirement.

“I really didn’t know anything about 401(k) plans before Mr. Jackson talked about it,” he said. “I 100 percent think it was worth it,” he said of the high school course.

The Center for Financial Education report said personal finance topics were most relevant in the 11th or 12th grade, just before students began managing their own living expenses. He recommended that students be taught these concepts shortly before they reach financial independence, whether they get a job or go to college.

Here are some questions and answers about financial education:

American adults have shown a “generally poor” level of financial literacy, 2023 report finds Personal financial index report from the TIAA Institute and the Center of Excellence in Global Financial Education.

The report serves as an annual barometer of financial literacy in the United States. The survey asks 28 questions about personal finances, including income, budgeting, spending, saving, investing, borrowing, debt management, insurance, understanding risks, and finding reliable sources of information and advice.

On average, adults answered about half of the index’s 28 questions correctly in 2023, consistent with results since 2017. Americans especially struggle to understand risk. The low level of financial resources is “concerning,” according to the report, because the index measures “practical knowledge” related to financial situations encountered in everyday life.

Improving financial literacy is important, the report says, because people with a very low level of financial literacy are more than four times more likely than those with a very high level to have difficulty making ends meet in a typical month.

FINRA offers a seven questions online financial education quiz. They want more? Try 10 questions Personal finances questionnaire of the Council of Economic Education.

Next Gen Personal Finance offers free curriculum materials and instruction for teachers. Other sources include the JumpStart Coalition for Personal Financial Education, a nonprofit organization that seeks to improve financial literacy among young people; he University of Chicago Financial Literacy Initiative; and the Consumer Financial Protection Bureau.