When adults reflect back on their high school experiences, one common complaint is that they never learned anything practical. They often recall facts like “the mitochondria is the powerhouse of the cell” or that Shakespeare uses iambic pentameter in his plays, but for the most part, they do not acquire critical financial skills like how to pay taxes, how to deal with credit cards or how to save. For many people, high school gives them an education, but an incomplete one.
It is time that educators return to the purpose of education, which is to provide students with both hard and soft skills that will help them excel in their academic, professional and personal lives. A good portion of high school syllabi do empower students through training them in mathematical, critical and creative thinking, but more needs to be done in high schools to teach students important financial skills. I therefore advocate a federal requirement that all schools have a financial skills class in their curriculum. This is especially pertinent because as the following data shows, Americans’ level of understanding about money is quite grim.
Let’s first start with taxes. Because most people are never taught how to pay these important bills, Americans remain quite confused about it. According to a 2017 nerdwallet article, 46 percent of Americans, for instance, do not know what tax bracket they are in. Likewise, many are mistaken about key tax terms: 56 percent of Americans assume that a tax extension gives them extra time to pay Uncle Sam even though that is not accurate. Because of this lack of comprehension, about 90 percent of Americans pay a tax professional or use software to file taxes. What is even more shocking is that nearly one-third of households with household income below $55,000 paid a tax professional to file their taxes. Considering that the average cost of hiring an accountant for filing a Federal 1040 income tax form is a whopping $200, paying taxes can become a financial hassle for low-income families. Unfortunately, most Americans are not aware of the IRS Free File software which approximately 70 percent of people are eligible to use.
It’s not only taxes. Americans seriously lack an understanding of credit cards: approximately 40 percent of the population does not understand how credit ratings work. This is dangerous — failing to understand how credit ratings work could prevent many Americans from making responsible financial decisions. It seems that some Americans are indeed making unwise economic actions. For instance, 43 percent of Americans either meet or meet less than the minimum monthly card payments, which can leave them in debt for years on end. Half of Americans carry a titanic $1,000 debt on their cards and 43 percent find repaying credit card debt the most stressful type of debt, even more than student or home loans. These poor practices hurt many people because being irresponsible with credit card borrowing means lower credit scores, which can prevent access to debt for big ticket items like houses and cars and even the ability to obtain utilities like electricity and water. Because of these concerning statistics and the importance of good credit, it is essential that important advice — like paying back the entire credit card debt on time and only borrowing 30 percent of your credit limit — are taught to students to reduce financial stress.
Beside our society’s misunderstanding of credit cards and taxes, we also struggle to follow a simple yet forgotten must-do: saving our money. Approximately one out of five adults do not save any of their income for long term use, such as keeping money for a down payment or a vacation. Perhaps more shockingly, 58 percent of Americans have not calculated about much they need to save for their retirement, even among those whose retirement would be coming up in 10 or 15 years. These numbers are especially concerning because it shows that Americans are particularly vulnerable to emergency fees like hospital or storm-related home damage fees. It’s no surprise then that, as the Federal Reserve notes, 40 percent of the population would struggle to come up with $400 to pay for any unexpected expense. Considering so many Americans are in such a vulnerable economic state, it is essential that we teach them how to manage their scarce monetary resources.
Being financially astute is still something out of reach for many Americans. It is imperative that the federal government pass legislation mandating that students learn how to manage money. In doing so, we can empower millions of young Americans to redefine their financial futures. Reflecting on this issue reminds me of my favorite TV character, Mr. Krabs, who once famously said that money is the ultimate source of happiness. Although I don’t completely agree with this statement, it sure does help to have a couple extra bucks in one’s pocket.
Arnav Mehra is a Collegian columnist and can be reached at [email protected].
