State Rep. Andy Davis isn’t sure why his bill was able to get traction this year when similar bills in previous years did not, but he’s delighted that his Personal Finance & Job Readiness Act received overwhelming support in both the House and Senate and is now Act 480 of 2017.
I’m delighted too, although the finished product is not exactly what Davis or I would prefer. He set out, in 2015, to fill a gaping void in our education system, one that is not unique to Arkansas, by requiring high school students to complete two semesters of study in personal finance and the elusive “soft skills” so necessary for success in the workforce. But “tons of pushback” from what he called the “education establishment” forced him to offer Plan B this year, a requirement that the equivalent of a full credit be incorporated into every student’s education between 10th and 12th grades.
Part of the education may wind up being taught in math classes, he said, and much of it may become part of the half-credit of economics education that has been required for the past eight years.
What high schools will be required to teach about personal finance is pretty ambitious — income and taxes, budgeting, checking and savings accounts, credit and debt management, insurance, charitable giving, home ownership, investing, long-term financial planning and many other concepts. One of my favorites: understanding paychecks.
On the job readiness side, the bill requires that students have the opportunity to learn about resumes and interview skills, communication, time management and “meeting basic employer expectations and requirements.”
Davis, a Republican from Little Rock, told me that his interest in making sure students were exposed to basic personal finance and job skills was “just a long personal education saga, and just based on my personal experience and my experience as a small business owner.”
Students, he said, “come out of high school, and to some extent college, without an idea of how to behave and how to dress and present themselves.”
Like his 2015 bill, similar bills by both Democrats and Republicans had languished in successive previous sessions, even though the gap in financial literacy is undeniable.
“People outside of politics in the real word, they recognize the importance of it… It doesn’t matter what you do, it’s part of life,” he said.
Last week I participated in a panel discussion at the the inaugural Women’s Financial Health Summit sponsored by the Arkansas 529 Plan, the college savings program administered by the state treasurer’s office. The audience was mostly female, as you would expect, and ranged in age from teens to geezers like me.
Among the questions from the audience were “What is a 401(k)?” and “What is a credit score?” I wouldn’t be alarmed if those were asked by a high school student, but anyone already in the workforce would be crippled by such ignorance.
The question that really slapped me in the face was “What is interest?” Since my mother showed me how a mortgage amortization worked when I was in junior high, I’m surprised that even a high school student wouldn’t know what interest is. Act 480 requires schools to introduce students to basic consumer finance, debt and credit management, and the need is obvious.
MetLife released last week the results of its 15th annual Employee Benefit Trends Study. In addition to interviewing 2,500 benefits decision makers, the life insurance company’s researchers interviewed 2,650 full-time employees at companies of all sizes. Surprise! Virtually half — 49 percent — of employees are “concerned, anxious or fearful about their current financial well-being.”
As noted by Quentin Fottrell, personal finance editor for MarketWatch, this could be because Americans have borrowed their way back to the same levels as in 2008. The New York Federal Reserve announced last week that total household debt in 2017 will reach $12.68 trillion, the peak it previously reached in the third quarter of 2008.
But the debt is different this time. Fully 10 percent of it is now student loans, which is one reason that less of it is mortgage debt.
I wish Act 480 specifically required schools to explain the pros and cons of student loans to the captive audience most likely to be making a decision they could be living with for decades. There’s no law against including it.
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Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com. |