Focus on Teaching Math—Not Money

It appears that classroom education in finance often doesn’t translate into real-world results.

For decades, studies have extolled the benefits of financial education, pointing out that students who take finance classes score well on tests of financial knowledge—and higher financial literacy leads to better financial behavior.  Conclusions like these have led to a growing consensus that schools should teach children about managing their finances, with 43 states now mandating some kind of training.

So, if widespread financial education were really effective, why are so many young people struggling with debt, foreclosure and low asset accumulation? A group of researchers set out to find an answer. They looked at the states that mandated personal-finance curriculum in high school, and compared the financial health of students who graduated before the mandates to those who graduated after. Their hypothesis: If personal-finance education worked, the students who graduated after the programs were implemented would be better off financially.

They weren’t. After controlling for state, age, race, time and sex, and analyzing a huge pool of historical financial data, the group found that there was no statistically significant difference between people who graduated within a 15-year span either before or after the personal-finance programs were implemented. Graduates’ asset accumulation and credit management were the same, with or without mandated financial education.

But the study, currently under revision for publication, did find one school subject that does have an impact on students’ financial outcomes: math. Students required by states to take additional math courses practiced better credit management than other students, had a greater percentage of investment income as part of their total income, reported $3,000 higher home equity and were better able to avoid both home foreclosure and credit-card delinquency.

Without strong math skills, people tend to use more emotional ways to invest, spend or save their money. What’s more, people with less math experience make worse financial mistakes with issues like compounding or underestimating how quickly interest accumulates.

A as parent, perhaps encouraging your kids to take as much math as they can will be the best tool for helping them be more successful at managing their money over time.