North Carolina has now passed legislation that makes learning about personal finances compulsory. This major move was mostly approved on the 27th of June 2019, pending signing off by the governor to become law.
As things stand, students in North Carolina learn about Finance and Economics regarding the economy and business. However, the new proposed course will have a strong focus on personal finances.
As there is a large problem with debt and people living paycheck to paycheck in the USA, this could be viewed as a smart strategy by the area. Empowering the new generations with the knowledge they need to avoid becoming unrecoverably in debt, or falling into traps such as ‘interest free’ promotions and overspending on student loans.
However, the course will also require space in the current curriculum and this means that something will need replacing. At the moment, that looks to be some of the U.S. History classes. History is also an important part of identity and avoiding the repeating of past mistakes. So, there is almost certainly to be some complaints and it may be negotiated or changed.
Why Do We Need to Teach Kids Personal Finance?
There is a serious debt issue in the United States. As of 2018, over 40% of the entire country couldn’t afford an unexpected expense of only $500. An expense like that would push many households beyond their budget and likely into financial difficulties, that could spiral once fees and interest start to mount up.
The US National Debt Clock shows that on average at the time of writing, there is a per citizen debt of over $68,000. This figure jumps up considerable when it is averaged against employed tax payers, increasing to an average of over 183,000. The country’s total debt is over 22 trillion dollars.
The problem is that easy credit was provided to a population that at the time, were not informed and educated in how to assess and manage credit and debts. Postponing the bills seems wonderful at first, and the interest free promotions make extra spending attractive.
Those that go onto further education are also racking up debts at an early age. Education loans are often the only way to obtain a degree and enter higher paying jobs. However, the debts mount up quickly with costs of living, university fees, books, computers etc. Then, if students pause repayments on loans while on a low salaries or job hunting, the debt grows bigger with interest every month.
Further issues arise as these habits and existing debts role on with time and debt levels increase, while interest rates start to kick in. Often, people end up finding themselves in a situation where their debt is simply moved from one month to the next, never fully cleared, and sometimes only just covering interest and the likelihood that the debt may never actually be paid off.
In fact, nearly 10% of Americans feel like they will never fully repay their debts.
According to studentloanhero.com, student debt is now exceeding credit card debt, reaching a staggering amount of “over $1.56 trillion in student loan debt”. That is about 521 billion dollars more than the average personal credit card debt!
Without understanding different refinance options out there, interest rates, credit line, and comparisons … things are unlikely to change soon.
How will the Course Help?
North Carolina is making the move to more of a progressive approach, teaching students about the areas of personal finance that will likely impact their lives and the quality of the life they have.
However, across the USA, the Council For Economic Education report shows that only 17 states make sure that students learn about personal finance. Many of the others do teach economics, but most of those economics courses are likely to be more related to general economics and business.
The approach of North Carolina is to teach real life skills, such as:
- How credit scoring and credit reports work
- How to understand financial terms and other related areas
- How to calculate the real cost of credit
- How educational loans work and planning their repayment
- Credit Cards – How to choose and manage repayments
- Car loans and large expenses
These will be taught in a way that enables students to not only understand how the financial vehicles work, but to also be able to compare and run calculations. There is a strong practical application need with finances, as understanding the idea is often very different to actually creating a workable plan and assessing the total real cost of taking on a line of credit.
With an average student loan repayment (excluding those in deferment) of $393 per month, there is a clear need for education. Many students leave college with a student debt of $30,000-$60,000. A lot of these students will also have personal loans and credit card debts on top of these student loans. Equipped with the above knowledge and skill sets, it is North Carolina’s hope to enable the younger generations to manage finances better and hopefully avoid a life of living with debt.